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Trade and productivity: The family connection redux

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  • Prettner, Klaus
  • Strulik, Holger

Abstract

We investigate the effects of demographic change and human capital accumulation on trade and productivity of domestic firms. In so doing we integrate a micro-founded education and fertility decision of households into a model of international trade with firm heterogeneity. Our framework leads to four testable implications: i) the export share of a country increases in the education level of its population, ii) the export share of a country decreases in the birth rate of its population, iii) the average profitability of firms increases in the education level of a country, iv) the average profitability of firms decreases in the birth rate of a country. We find that all four implications are supported by empirical evidence for a panel of OECD countries from 1960 to 2010. Our results suggest that investments in human capital accumulation, especially in higher education, are an important determinant of a country's international competitiveness. Furthermore, falling birth rates need not be a serious concern with respect to productivity and international competitiveness of countries. --

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Bibliographic Info

Paper provided by University of Goettingen, Department of Economics in its series Center for European, Governance and Economic Development Research Discussion Papers with number 159.

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Date of creation: 2013
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Handle: RePEc:zbw:cegedp:159

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Keywords: firm heterogeneity; international competitiveness; education; fertility decline;

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References

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Cited by:
  1. Prettner, Klaus & Strulik, Holger, 2014. "Technology, trade, and growth: The role of education," Center for European, Governance and Economic Development Research Discussion Papers 191, University of Goettingen, Department of Economics.

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