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Trade liberalization and heterogeneous within-firm productivity improvements

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  • Maria Bas

    (PSE - Paris-Jourdan Sciences Economiques - CNRS : UMR8545 - École des Hautes Études en Sciences Sociales (EHESS) - École des Ponts ParisTech (ENPC) - École normale supérieure [ENS] - Paris)

  • Ivan Ledezma

    (PSE - Paris-Jourdan Sciences Economiques - CNRS : UMR8545 - École des Hautes Études en Sciences Sociales (EHESS) - École des Ponts ParisTech (ENPC) - École normale supérieure [ENS] - Paris)

Abstract

This paper develops an intra-industry model of trade with heterogeneous firms to investigate the impact of trade on the evolution of within firm productivity. The main contribution is to incorporate endogenous labor productivity gains. Heterogeneous firms have different incentives to invest in foreign technology which in turns enhances efficiency heterogeneously. Trade liberalization reduces the price of imported capital equipment and increases factor demands. These mechanisms introduce two novel results. First, aggregate productivity increases due to within-firm productivity improvements. Second, tariffs reduction has little impact on the extensive margin of trade in countries already highly open.

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Bibliographic Info

Paper provided by HAL in its series PSE Working Papers with number halshs-00590303.

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Date of creation: Jun 2008
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Handle: RePEc:hal:psewpa:halshs-00590303

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Keywords: trade liberalization ; firm heterogeneity ; endogenous productivity gains ; extensive margin of trade;

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  1. Sofronis K. Clerides & Saul Lach & James R. Tybout, 1998. "Is Learning By Exporting Important? Micro-Dynamic Evidence From Colombia, Mexico, And Morocco," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 113(3), pages 903-947, August.
  2. De Loecker, Jan & Konings, Jozef, 2004. "Creative Destruction and Productivity Growth in an Emerging Economy: Evidence from Slovenian Manufacturing," CEPR Discussion Papers, C.E.P.R. Discussion Papers 4238, C.E.P.R. Discussion Papers.
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  5. Maria Bas & Ivan Ledezma, 2007. "Market Access and the Evolution of within Plant Productivity in Chile," CESifo Working Paper Series 2077, CESifo Group Munich.
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  7. Nina Pavcnik, 2002. "Trade Liberalization, Exit, and Productivity Improvements: Evidence from Chilean Plants," Review of Economic Studies, Oxford University Press, vol. 69(1), pages 245-276.
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  12. Yeaple, Stephen Ross, 2005. "A simple model of firm heterogeneity, international trade, and wages," Journal of International Economics, Elsevier, Elsevier, vol. 65(1), pages 1-20, January.
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  14. Daniel Trefler, 2004. "The Long and Short of the Canada-U. S. Free Trade Agreement," American Economic Review, American Economic Association, American Economic Association, vol. 94(4), pages 870-895, September.
  15. Roberts, Mark J & Tybout, James R, 1997. "The Decision to Export in Colombia: An Empirical Model of Entry with Sunk Costs," American Economic Review, American Economic Association, American Economic Association, vol. 87(4), pages 545-64, September.
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Cited by:
  1. Konings, Jozef & Vandenbussche, Hylke, 2009. "Antidumping Protection hurts Exporters: Firm-level evidence from France," CEPR Discussion Papers, C.E.P.R. Discussion Papers 7330, C.E.P.R. Discussion Papers.

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