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Gains from Trade and Measured Total Factor Productivity

Author Info

  • Pedro Cavalcanti Ferreira

    (Fundacao Getulio Vargas)

  • Alberto Trejos

    (INCAE)

Abstract

We develop and calibrate a model where differences in factor endowments lead countries to trade different goods, so that the existence of international trade changes the sectorial composition of output from one country to another. Gains from trade reflect in total factor productivity. We perform a development decomposition, to assess the impact of trade -and of the elimination of barriers to trade- on measured TFP. In our sample, the median size of the effect of going from no trade to free trade is about 6.5% of output, with a mean of 17% and a maximum of 89%. Also, the model predicts that changes in the terms of trade cause a change of productivity, and that effect has an average elasticity of 0.73. (Copyright: Elsevier)

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File URL: http://dx.doi.org/10.1016/j.red.2011.01.001
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Article provided by Elsevier for the Society for Economic Dynamics in its journal Review of Economic Dynamics.

Volume (Year): 14 (2011)
Issue (Month): 3 (July)
Pages: 496-510

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Handle: RePEc:red:issued:08-110
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Keywords: Productivity differences; Gains from openness; Terms of trade; Development decomposition; Heckscher-Ohlin;

Other versions of this item:

Find related papers by JEL classification:
  • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
  • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
  • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
  • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
  • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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  1. Francesco Caselli, 2004. "Accounting for Cross-Country Income Differences," NBER Working Papers 10828, National Bureau of Economic Research, Inc.
  2. E. Cristina Echevarria, 2008. "International trade and the sectoral composition of production," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 11(1), pages 192-206, January.
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  6. Robert J. Barro & Jong-Wha Lee, 2000. "International Data on Educational Attainment Updates and Implications," NBER Working Papers 7911, National Bureau of Economic Research, Inc.
  7. Andres Rodriguez-Clare, 2007. "Trade, Diffusion and the Gains from Openness," 2007 Meeting Papers 126, Society for Economic Dynamics.
  8. Felipe Meza & Erwan Quintin, 2005. "Financial crises and total factor productivity," Center for Latin America Working Papers 0105, Federal Reserve Bank of Dallas.
  9. Richard Rogerson & Diego Restuccia, 2004. "Policy Distortions and Aggregate Productivity with Heterogeneous Plants," 2004 Meeting Papers 69, Society for Economic Dynamics.
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  13. Robert E. Hall & Charles I. Jones, 1999. "Why Do Some Countries Produce So Much More Output per Worker than Others?," NBER Working Papers 6564, National Bureau of Economic Research, Inc.
  14. Peter Klenow & Andrés Rodríguez-Clare, 1997. "The Neoclassical Revival in Growth Economics: Has It Gone Too Far?," NBER Chapters, in: NBER Macroeconomics Annual 1997, Volume 12, pages 73-114 National Bureau of Economic Research, Inc.
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  19. repec:dgr:rugggd:gd-95 is not listed on IDEAS
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Cited by:

  1. Ferreira, Pedro Cavalcanti & Trejos, Alberto, 2016. "Fracking, China and the Global Economy," Economics Working Papers (Ensaios Economicos da EPGE) 777, FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).
  2. Diego Restuccia & Richard Rogerson, 2012. "Misallocation and Productivity," Working Papers tecipa-468, University of Toronto, Department of Economics.
  3. Paula Puskarova & Philipp Piribauer, 2014. "The impact of knowledge spillovers on regional total factor productivity. New empirical evidence from selected European countries," ERSA conference papers ersa14p1813, European Regional Science Association.
  4. Paula Puškárová, 2015. "Analýza vplyvu ľudského kapitálu na celkovú produktivitu faktorov v regiónoch EÚ modelom SDM
    [Analysis of the Human Capital Impacts on the Total Factor Productivity in the EU Regions By Means of th    ," Politická ekonomie, University of Economics, Prague, vol. 2015(5), pages 657-675.

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