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Trade Costs, Resource Reallocation and Productivity in Developing Countries

Author

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  • Juan Blyde
  • Gonzalo Iberti

Abstract

An increasing body of evidence indicates that an important share of aggregate productivity growth, in both developed and developing countries, arises from the reallocation of resources across plants of different productivity levels. New trade models with heterogeneous firms (Bernard et al., 2003; Melitz, 2003) suggest that international trade plays an important role in this reallocative process. Focusing on a developing country, Chile, we use explicit measures of trade costs to explore the existence of the channels suggested by these new trade models. We provide new key findings for developing countries: first, trade costs affect the reallocative process by protecting inefficient producers, lowering their likelihood to exit, and also by limiting the expansion of efficient plants, lowering their likelihood to export. Second, the reallocative impacts of trade arise not only from tariff barriers but also from transport costs.
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Suggested Citation

  • Juan Blyde & Gonzalo Iberti, 2012. "Trade Costs, Resource Reallocation and Productivity in Developing Countries," Review of International Economics, Wiley Blackwell, vol. 20(5), pages 909-923, November.
    • Handle: RePEc:bla:reviec:v:20:y:2012:i:5:p:909-923
    DOI: roie.12003
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    Cited by:

    1. Han-Hsin Chang & Charles Van Marrewijk, 2013. "Firm heterogeneity and development: Evidence from Latin American countries," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 22(1), pages 11-52, February.
    2. Haoyuan Ding & Kees G. Koedijk & Tong Qi & Yanqing Shen, 2022. "U.S.–China trade war and corporate reallocation: Evidence from Chinese listed companies," The World Economy, Wiley Blackwell, vol. 45(12), pages 3907-3932, December.
    3. Tseng, Eric & Sheldon, Ian, 2015. "Quality Upgrading, Trade, and Market Structure in Food Processing Industries," 2015: Trade and Societal Well-Being, December 13-15, 2015, Clearwater Beach, Florida 229237, International Agricultural Trade Research Consortium.
    4. Abdoulaye Seck, 2017. "How Facilitating Trade would Benefit Trade in Sub-Saharan Africa," Journal of African Development, African Finance and Economic Association (AFEA), vol. 19(1), pages 1-26.
    5. Mao, Qilin & Sheng, Bin, 2017. "The impact of tariff reductions on firm dynamics and productivity in China: Does market-oriented transition matter?," China Economic Review, Elsevier, vol. 45(C), pages 168-194.
    6. Simola, Antti, 2014. "Mitigation of Aquatic Contaminant Hazards – Economic Analysis of Regional Costs and Benefits," Conference papers 332551, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    7. Tseng, Eric, 2014. "Trade Costs, Financial Constraints, and Firm Performance in Developing Countries," 2014 Annual Meeting, July 27-29, 2014, Minneapolis, Minnesota 169786, Agricultural and Applied Economics Association.
    8. Yoshimichi Murakami, 2021. "Trade liberalization and wage inequality: Evidence from Chile," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 30(3), pages 407-438, April.

    More about this item

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance

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