Advanced Search
MyIDEAS: Login to save this paper or follow this series

Dynamic Selection and the New Gains from Trade with Heterogeneous Firms

Contents:

Author Info

  • Thomas Sampson
Registered author(s):

    Abstract

    This paper develops an open economy growth model in which firm heterogeneity increases the gains from trade. Technology spillovers from incumbent firms to entrants cause the productivity threshold for firm survival to grow over time as competition becomes tougher. By raising the profits of exporters, trade increases the entry rate and generates a dynamic selection effect that leads to higher growth. The paper shows that the gains from trade can be decomposed into: static gains that equal the total gains from trade in an economy without technology spillovers, and; dynamic gains that are strictly positive. Since trade raises growth through selection, not scale effects, the positive growth effect of trade vanishes when firms are homogeneous. Thus, firm heterogeneity creates a new source of dynamic gains from trade. Calibrating the model to the U.S. economy implies that dynamic selection approximately triples the gains from trade.

    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://www.fiw.ac.at/fileadmin/Documents/Publikationen/Working_Paper/N_122-Sampson.pdf
    File Function: full text
    Download Restriction: none

    Bibliographic Info

    Paper provided by FIW in its series FIW Working Paper series with number 122.

    as in new window
    Length: 41
    Date of creation: Apr 2013
    Date of revision:
    Handle: RePEc:wsr:wpaper:y:2013:i:122

    Contact details of provider:

    Order Information:
    Postal: FIW Project Office Austrian Institute of Economic Research Arsenal Objekt 20 A-1030 Vienna
    Email:

    Related research

    Keywords: Gains from Trade; Endogenous Growth; Firm Heterogeneity;

    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. Kremer, Michael, 1993. "Population Growth and Technological Change: One Million B.C. to 1990," The Quarterly Journal of Economics, MIT Press, vol. 108(3), pages 681-716, August.
    2. Melitz, Marc J, 2002. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," CEPR Discussion Papers 3381, C.E.P.R. Discussion Papers.
    3. Costas Arkolakis & Arnaud Costinot & Andrés Rodríguez-Clare, 2009. "New Trade Models, Same Old Gains?," NBER Working Papers 15628, National Bureau of Economic Research, Inc.
    4. Krugman, Paul, 1980. "Scale Economies, Product Differentiation, and the Pattern of Trade," American Economic Review, American Economic Association, vol. 70(5), pages 950-59, December.
    5. Tetsugen Haruyama & Laixun Zhao, 2008. "Trade and Firm Heterogeneity In A Quality-Ladder Model of Growth," Discussion Paper Series 223, Research Institute for Economics & Business Administration, Kobe University.
    6. Garcia-Penalosa, Cecilia & Turnovsky, Stephen J., 2005. "Production risk and the functional distribution of income in a developing economy: tradeoffs and policy responses," Journal of Development Economics, Elsevier, vol. 76(1), pages 175-208, February.
    Full references (including those not matched with items on IDEAS)

    Citations

    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:wsr:wpaper:y:2013:i:122. 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: ().

    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.