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Technology Choice and International Trade

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  • Gabriela Schmidt
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    Abstract

    This paper develops two extensions of the dynamic model presented in Melitz (2003). The first extension consists in the introduction of technology choice between three alternative production technologies: L, M and H. L is assumed to be the same as Melitz’s single production technology, while M and H are assumed to be superior production technologies, stemming this superiority from the fact these technologies substitute the more primitive capital goods used in technology L with newer, updated versions which embody technological advances, and also from the fact that M and H are more skill-intensive than L. Technologies M and H are equally skill-intensive, but H still is superior to M because it incorporates world-technology-frontier capital goods, while the capital goods used in M are below such frontier. The second extension consists in the introduction of two different exporting profiles: “Low-Commitment Exporters” –who make the minimum possible investment required to penetrate export markets- and “High-Commitment Exporters” –who are ready to make additional trade-related investments in order to gain additional export sales-

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    Bibliographic Info

    Paper provided by Kiel Institute for the World Economy in its series Kiel Working Papers with number 1600.

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    Length: 44 pages
    Date of creation: Mar 2010
    Date of revision:
    Handle: RePEc:kie:kieliw:1600

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    Keywords: technology choice – heterogeneous firms – export profiles – embodied technology –resources’ redistribution – monopolistic competition;

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    1. Jonathan Eaton & Samuel Kortum, 1995. "Trade in Ideas: Patenting and Productivity in the OECD," NBER Working Papers 5049, National Bureau of Economic Research, Inc.
    2. Keller, Wolfgang, 2001. "The geography and channels of diffusion at the world's technology frontier," HWWA Discussion Papers 123, Hamburg Institute of International Economics (HWWA).
    3. Coe, David T & Helpman, Elhanan & Hoffmaister, Alexander, 1995. "North-South R&D Spillovers," CEPR Discussion Papers, C.E.P.R. Discussion Papers 1133, C.E.P.R. Discussion Papers.
    4. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, American Economic Association, vol. 67(3), pages 297-308, June.
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    7. Acemoglu, D., 1997. "Why Do New Technologies Complement Skills? Directed Technical Change and Wage Inequality," Working papers, Massachusetts Institute of Technology (MIT), Department of Economics 97-14, Massachusetts Institute of Technology (MIT), Department of Economics.
    8. Diego Restuccia, 2004. "Barriers to Capital Accumulation and Aggregate Total Factor Productivity," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 45(1), pages 225-238, 02.
    9. Jonathan Eaton & Samuel Kortum, 1995. "Engines of Growth: Domestic and Foreign Sources of Innovation," NBER Working Papers 5207, National Bureau of Economic Research, Inc.
    10. Melitz, Marc J, 2002. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," CEPR Discussion Papers, C.E.P.R. Discussion Papers 3381, C.E.P.R. Discussion Papers.
    11. Wolfgang Keller, 2000. "Geographic Localization of International Technology Diffusion," NBER Working Papers 7509, National Bureau of Economic Research, Inc.
    12. Paula Bustos, 2005. "The impact of trade liberalization on skill upgrading. Evidence from Argentina," Economics Working Papers, Department of Economics and Business, Universitat Pompeu Fabra 1189, Department of Economics and Business, Universitat Pompeu Fabra, revised Jul 2011.
    13. Susanto Basu & David N. Weil, 1998. "Appropriate Technology And Growth," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 113(4), pages 1025-1054, November.
    14. Daron Acemoglu, 2003. "Patterns of Skill Premia," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 70(2), pages 199-230, 04.
    15. Per Krusell & Lee E. Ohanian & JosÈ-Victor RÌos-Rull & Giovanni L. Violante, 2000. "Capital-Skill Complementarity and Inequality: A Macroeconomic Analysis," Econometrica, Econometric Society, Econometric Society, vol. 68(5), pages 1029-1054, September.
    16. Bartel, Ann P & Lichtenberg, Frank R, 1987. "The Comparative Advantage of Educated Workers in Implementing New Technology," The Review of Economics and Statistics, MIT Press, vol. 69(1), pages 1-11, February.
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