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Gains from Trade and Measured Total Factor Productivity

Author

Listed:
  • 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)

Suggested Citation

  • Pedro Cavalcanti Ferreira & Alberto Trejos, 2011. "Gains from Trade and Measured Total Factor Productivity," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 14(3), pages 496-510, July.
  • Handle: RePEc:red:issued:08-110
    DOI: 10.1016/j.red.2011.01.001
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Diego Restuccia & Richard Rogerson, 2013. "Misallocation and productivity," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 16(1), pages 1-10, January.
    2. Ferreira, Pedro Cavalcanti & Trejos, Alberto, 2016. "Fracking, China and the Global Economy," FGV/EPGE Economics Working Papers (Ensaios Economicos da EPGE) 777, FGV/EPGE - Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).
    3. 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.
    4. 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.

    More about this item

    Keywords

    Productivity differences; Gains from openness; Terms of trade; Development decomposition; Heckscher-Ohlin;

    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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