Advanced Search
MyIDEAS: Login

Globalization and Productivity in the Developing World

Contents:

Author Info

  • Foellmi, Reto

    ()

  • Oechslin, Manuel

    ()

Abstract

We explore the productivity impact of international trade in a monopolistically competitive economy with endogenous mark-ups due to credit market frictions. We show that reducing trade barriers in such an environment (i) may - but not necessarily must – have a negative impact on productivity and output; (ii) is bound to increase the polarization of the income distribution. The reason is that the pro-competitive effects of trade reduce mark-ups and hence the borrowing capacity of less affluent entrepreneurs. As a result, smaller firms may no longer be able to make the investments required to operate the high-productivity technology. Our findings are consistent with evidence from developing countries which (i) does not suggest a clear-cut impact of trade on economic performance; (ii) hints at an inequality-increasing effect of globalization.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www1.vwa.unisg.ch/RePEc/usg/econwp/EWP-1203.pdf
Download Restriction: no

Bibliographic Info

Paper provided by University of St. Gallen, School of Economics and Political Science in its series Economics Working Paper Series with number 1203.

as in new window
Length: 34 pages
Date of creation: Feb 2012
Date of revision:
Handle: RePEc:usg:econwp:2012:03

Contact details of provider:
Postal: Dufourstrasse 50, CH - 9000 St.Gallen
Phone: +41 71 224 23 25
Fax: +41 71 224 31 35
Email:
Web page: http://www.seps.unisg.ch/
More information through EDIRC

Related research

Keywords: International trade; credit market frictions; productivity; inequality;

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Chang-Tai Hsieh & Peter Klenow, 2009. "Misallocation and Manufacturing TFP in China and India," Working Papers 09-04, Center for Economic Studies, U.S. Census Bureau.
  2. Andrew B. Bernard & Jonathan Eaton & J. Bradford Jensen & Samuel Kortum, 2000. "Plants and Productivity in International Trade," Boston University - Institute for Economic Development 105, Boston University, Institute for Economic Development.
  3. Esteban, J.M. & Ray, D., 1992. "On the Measurement of Polarization," UFAE and IAE Working Papers 171.92, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
  4. Epifani, Paolo & Gancia, Gino A., 2009. "Trade, Markup Heterogeneity and Misallocations," CEPR Discussion Papers 7217, C.E.P.R. Discussion Papers.
  5. Pinelopi Koujianou Goldberg & Nina Pavcnik, 2007. "Distributional Effects of Globalization in Developing Countries," NBER Working Papers 12885, National Bureau of Economic Research, Inc.
  6. Daron Acemoglu & Fabrizio Zilibotti, 2001. "Productivity Differences," The Quarterly Journal of Economics, MIT Press, vol. 116(2), pages 563-606, May.
  7. Anthony B. Atkinson & Thomas Piketty & Emmanuel Saez, 2009. "Top Incomes in the Long Run of History," NBER Working Papers 15408, National Bureau of Economic Research, Inc.
  8. Reto Foellmi & Manuel Oechslin, 2010. "Market Imperfections, Wealth Inequality, and the Distribution of Trade Gains," Diskussionsschriften dp1006, Universitaet Bern, Departement Volkswirtschaft.
  9. Zheng Song & Kjetil Storesletten & Fabrizio Zilibotti, 2011. "Growing Like China," American Economic Review, American Economic Association, vol. 101(1), pages 196-233, February.
  10. Timothy J. Kehoe & Kim J. Ruhl, 2010. "Why Have Economic Reforms in Mexico Not Generated Growth?," NBER Working Papers 16580, National Bureau of Economic Research, Inc.
  11. Marc J. Melitz, 2003. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," Econometrica, Econometric Society, vol. 71(6), pages 1695-1725, November.
  12. Dixit, Avinash K & Stiglitz, Joseph E, 1975. "Monopolistic Competition and Optimum Product Diversity," The Warwick Economics Research Paper Series (TWERPS) 64, University of Warwick, Department of Economics.
  13. Kiminori Matsuyama, 2005. "Credit Market Imperfections and Patterns of International Trade and Capital Flows," Journal of the European Economic Association, MIT Press, vol. 3(2-3), pages 714-723, 04/05.
  14. Banerjee, Abhijit V. & Duflo, Esther, 2005. "Growth Theory through the Lens of Development Economics," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 7, pages 473-552 Elsevier.
  15. Abhijit V. Banerjee & Esther Duflo, 2010. "Giving Credit Where It Is Due," Journal of Economic Perspectives, American Economic Association, vol. 24(3), pages 61-80, Summer.
  16. Marc J. Melitz & Gianmarco I. P. Ottaviano, 2008. "Market Size, Trade, and Productivity," Review of Economic Studies, Oxford University Press, vol. 75(1), pages 295-316.
  17. Rodrik, Dani, 2010. "Diagnostics Before Prescription," Scholarly Articles 8057678, Harvard Kennedy School of Government.
  18. David N. DeJong & Marla Ripoll, 2006. "Tariffs and Growth: An Empirical Exploration of Contingent Relationships," The Review of Economics and Statistics, MIT Press, vol. 88(4), pages 625-640, November.
  19. Bertola, Giuseppe & Lo Prete, Anna, 2010. "Whence Policy? Government Policies, Finance, and Economic Integration," CEPR Discussion Papers 7820, C.E.P.R. Discussion Papers.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Vannoorenberghe, G., 2014. "International trade, risk taking and welfare," Journal of International Economics, Elsevier, vol. 92(2), pages 363-374.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:usg:econwp:2012:03. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Martina Flockerzi).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.