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Trade Costs, Resource Reallocation and Productivity in Developing Countries

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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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    File URL: http://hdl.handle.net/10.1111/roie.12003
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    References listed on IDEAS

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    1. Roberto Alvarez & Ricardo López, 2005. "Exporting and performance: evidence from Chilean plants," Canadian Journal of Economics, Canadian Economics Association, vol. 38(4), pages 1384-1400, November.
    2. Sofronis K. Clerides & Saul Lach & James R. Tybout, 1998. "Is Learning by Exporting Important? Micro-Dynamic Evidence from Colombia, Mexico, and Morocco," The Quarterly Journal of Economics, Oxford University Press, vol. 113(3), pages 903-947.
    3. Chang-Tai Hsieh & Peter J. Klenow, 2009. "Misallocation and Manufacturing TFP in China and India," The Quarterly Journal of Economics, Oxford University Press, vol. 124(4), pages 1403-1448.
    4. Maurice Kugler & John Haltiwanger & Adriana Kugler & Marcela Eslava, 2009. "Trade Reforms and Market Selection: Evidence from Manufacturing Plants in Colombia," 2009 Meeting Papers 615, Society for Economic Dynamics.
    5. Ai, Chunrong & Norton, Edward C., 2003. "Interaction terms in logit and probit models," Economics Letters, Elsevier, vol. 80(1), pages 123-129, July.
    6. Harrison, Ann E., 1994. "Productivity, imperfect competition and trade reform : Theory and evidence," Journal of International Economics, Elsevier, vol. 36(1-2), pages 53-73, February.
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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. Tseng, Eric & Sheldon, Ian, 2015. "Quality Upgrading, Trade, and Market Structure in Food Processing Industries," Proceedings Issues, 2014: Trade and Societal Well-Being, December 13-15, 2015, Clearwater Beach, Florida 229237, International Agricultural Trade Research Consortium.
    3. repec:afe:journl:v:19:y:2017:i:1:p:1-26 is not listed on IDEAS
    4. repec:eee:chieco:v:45:y:2017:i:c:p:168-194 is not listed on IDEAS
    5. 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.

    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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