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The Impact Of Trade Liberalization On Industrial Productivity

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  • Paul S. Segerstrom
  • Yoichi Sugita

Abstract

An empirical finding by Trefler (2004, “The Long and Short of the Canada–U.S. Free Trade Agreement”, American Economic Review, 94(4), 870–895) and others that industrial productivity increases more strongly in liberalized industries than in nonliberalized industries has been widely accepted as evidence for the Melitz ( , “The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity”, Econometrica, 71, 1695–1725) model. We show that under fairly standard assumptions a multi-industry version of the Melitz model does not predict this relationship. Instead, it predicts the opposite relationship that industrial productivity increases more strongly in nonliberalized industries than in liberalized industries.

Suggested Citation

  • Paul S. Segerstrom & Yoichi Sugita, 2015. "The Impact Of Trade Liberalization On Industrial Productivity," Journal of the European Economic Association, European Economic Association, vol. 13(6), pages 1167-1179, December.
    • Handle: RePEc:bla:jeurec:v:13:y:2015:i:6:p:1167-1179
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    More about this item

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations

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