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Gains from trade and measured total factor productivity

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  • Ferreira, Pedro Cavalcanti
  • Trejos, Alberto
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    Abstract

    We develop and calibrate a model where di¤erences in factor en-dowments lead countries to trade di¤erent goods, so that the existenceof international trade changes the sectorial composition of output fromone country to another. Gains from trade re ect in total factor produc-tivity. We perform a development decomposition, to assess the impactof trade and barriers to trade on measured TFP. In our sample, themedian size of that e¤ect is about 6.5% of output, with a median of17% and a maximum of 89%. Also, the model predicts that changes inthe terms of trade cause a change of productivity, and that e¤ect hasan average elasticity of 0.71.

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    Bibliographic Info

    Paper provided by FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil) in its series Economics Working Papers (Ensaios Economicos da EPGE) with number 711.

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    Date of creation: 31 May 2010
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    Handle: RePEc:fgv:epgewp:711

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    1. Diego Restuccia & Richard Rogerson, 2007. "Policy Distortions and Aggregate Productivity with Heterogeneous Plants," NBER Working Papers 13018, National Bureau of Economic Research, Inc.
    2. Robert C. Feenstra & Alan Heston & Marcel P. Timmer & Haiyan Deng, 2009. "Estimating Real Production and Expenditures across Nations: A Proposal for Improving the Penn World Tables," The Review of Economics and Statistics, MIT Press, vol. 91(1), pages 201-212, February.
    3. Ferreira Pedro C. & Pessoa Samuel A & Veloso Fernando A, 2008. "The Evolution of International Output Differences (1970-2000): From Factors to Productivity," The B.E. Journal of Macroeconomics, De Gruyter, vol. 8(1), pages 1-34, February.
    4. Timothy J. Kehoe & Kim J. Ruhl, 2008. "Are Shocks to the Terms of Trade Shocks to Productivity?," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 11(4), pages 804-819, October.
    5. Timothy J. Kehoe & Kim J. Ruhl, 2008. "Sudden Stops, Sectoral Reallocations, and the Real Exchange Rate," NBER Working Papers 14395, National Bureau of Economic Research, Inc.
    6. Robert J. Barro & Jong-Wha Lee, 2000. "International Data on Educational Attainment: Updates and Implications," CID Working Papers 42, Center for International Development at Harvard University.
    7. Daron Acemoglu & Veronica Guerrieri, 2006. "Capital Deepening and Non-Balanced Economic Growth," 2006 Meeting Papers 207, Society for Economic Dynamics.
    8. Felipe Meza & Erwan Quintin, 2005. "Financial crises and total factor productivity," Center for Latin America Working Papers 0105, Federal Reserve Bank of Dallas.
    9. Fernando Alvarez & Robert E. Lucas, 2005. "General Equilibrium Analysis of the Eaton-Kortum Model of International Trade," NBER Working Papers 11764, National Bureau of Economic Research, Inc.
    10. Andres Rodriguez-Clare, 2007. "Trade, Diffusion and the Gains from Openness," NBER Working Papers 13662, National Bureau of Economic Research, Inc.
    11. Summers, Robert & Heston, Alan, 1991. "The Penn World Table (Mark 5): An Expanded Set of International Comparisons, 1950-1988," The Quarterly Journal of Economics, MIT Press, vol. 106(2), pages 327-68, May.
    12. Patrick J. Kehoe & Timothy J. Kehoe, 1994. "Capturing NAFTA's impact with applied general equilibrium models," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Spr, pages 17-34.
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