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Trade Costs, Resource Reallocation and Productivity in Developing Countries

  • Juan Blyde
  • Gonzalo Iberti

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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File URL: http://hdl.handle.net/10.1111/roie.12003
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Article provided by Wiley Blackwell in its journal Review of International Economics.

Volume (Year): 20 (2012)
Issue (Month): 5 (November)
Pages: 909-923

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Handle: RePEc:bla:reviec:v:20:y:2012:i:5:p:909-923
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  1. Chang-Tai Hsieh & Peter J. Klenow, 2007. "Misallocation and Manufacturing TFP in China and India," NBER Working Papers 13290, National Bureau of Economic Research, Inc.
  2. Marcela Eslava & John C. Haltiwanger & Adriana D. Kugler & Maurice Kugler, 2009. "Trade Reforms and Market Selection: Evidence from Manufacturing Plants in Colombia," NBER Working Papers 14935, National Bureau of Economic Research, Inc.
  3. Sofronis Clerides & Saul Lach & James Tybout, 1996. "Is "learning-by-exporting" important? Micro-dynamic evidence from Colombia, Mexico and Morocco," Finance and Economics Discussion Series 96-30, Board of Governors of the Federal Reserve System (U.S.).
  4. 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.
  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. 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.
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