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Trade liberalization, exports and technology upgrading: Evidence on the impact of MERCOSUR on Argentinean firms

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This paper studies the impact of a regional free trade agreement, MERCOSUR, on technology upgrading by Argentinean firms. To guide empirical work, I introduce technology choice in Melitz’s (2003) model of trade with heterogeneous firms. The joint treatment of the technology adoption and exporting choices shows that the increase in revenues produced by trade integration can induce exporters to upgrade technology. An empirical test of the model reveals that firms in industries facing higher reductions in Brazil’s tariffs increase their investment in technology faster. The effect of tariffs on entry in the export market and technology adoption is highest in the upper-middle range of the firm size distribution, as predicted by the model.

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Paper provided by Department of Economics and Business, Universitat Pompeu Fabra in its series Economics Working Papers with number 1173.

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Date of creation: Aug 2009
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Handle: RePEc:upf:upfgen:1173

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Keywords: Trade Liberalization; Heterogeneous Firms; Exports; Technology Adoption; MERCOSUR; Argentina.;

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