Trade costs, resource reallocation and productivity in developing countries
AbstractAn increasing body of evidence indicates that an important share of aggregate productivity growth, in both developed and developing countries, arises from the reallocation of resources across plants of different productivity levels. New trade models with heterogeneous firms (Bernard et al., 2003; Melitz, 2003) suggest that international trade plays an important role in this reallocative process. Focusing on a developing country, Chile, we use explicit measures of trade costs to explore the existence of the channels suggested by these new trade models. We provide new key findings for developing countries: first, trade costs affect the reallocative process by protecting inefficient producers, lowering their likelihood to exit, and also by limiting the expansion of efficient plants, lowering their likelihood to export. Second, the reallocative impacts of trade arise not only from tariff barriers but also from transport costs.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 21318.
Date of creation: Feb 2010
Date of revision:
Trade costs; productivity; resource reallocation;
Other versions of this item:
- Juan Blyde & Gonzalo Iberti, 2012. "Trade Costs, Resource Reallocation and Productivity in Developing Countries," Review of International Economics, Wiley Blackwell, vol. 20(5), pages 909-923, November.
- F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
- F14 - International Economics - - Trade - - - Empirical Studies of Trade
- L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-04-04 (All new papers)
- NEP-DEV-2010-04-04 (Development)
- NEP-EFF-2010-04-04 (Efficiency & Productivity)
- NEP-INT-2010-04-04 (International Trade)
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