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How Barriers to International Trade Affect TFP

We ask how barriers to international trade affect TFP when there are monopoly rights in the import-competing industries. Holmes and Schmitz (1995) show that without barriers to trade TFP in these industries is as large as possible. We study the general case of finite barriers to trade. We find that binding quotas lead to the use of inefficient technology in the import-competing industries. In addition, finite quotas or tariffs imply that the import-competing industries produce larger than efficient quantities, if they produce at all. For both of these reasons, barriers to international trade reduce TFP.

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Paper provided by Department of Economics, W. P. Carey School of Business, Arizona State University in its series Working Papers with number 2167724.

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Handle: RePEc:asu:wpaper:2167724
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  1. Berthold Herrendorf & Arilton Teixeira, 2004. "Monopoly rights can reduce income big time," Econometric Society 2004 North American Winter Meetings 373, Econometric Society.
  2. Restuccia, Diego & Urrutia, Carlos, 2001. "Relative prices and investment rates," Journal of Monetary Economics, Elsevier, vol. 47(1), pages 93-121, February.
  3. James A. Schmitz, Jr., 1997. "Government production of investment goods and aggregate labor productivity," Staff Report 240, Federal Reserve Bank of Minneapolis.
  4. Acemoglu, D. & Zilibotti, F., 1998. "Productivity Differences," Papers 660, Stockholm - International Economic Studies.
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  8. Edward C. Prescott & Stephen L. Parente, 1999. "Monopoly Rights: A Barrier to Riches," American Economic Review, American Economic Association, vol. 89(5), pages 1216-1233, December.
  9. Pavcnik, Nina, 2002. "Trade Liberalization, Exit, and Productivity Improvement: Evidence from Chilean Plants," Review of Economic Studies, Wiley Blackwell, vol. 69(1), pages 245-76, January.
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  13. James Harrigan, 1997. "Cross-country comparisons of industry total factor productivity: theory and evidence," Research Paper 9734, Federal Reserve Bank of New York.
  14. Thomas J. Holmes & James A. Schmitz, Jr., 1994. "Resistance to technology and trade between areas," Staff Report 184, Federal Reserve Bank of Minneapolis.
  15. Ferreira, Pedro Cavalcanti Gomes & Trejos, Alberto, 2001. "On the Long Run Effects of Barriers to Trade," Economics Working Papers (Ensaios Economicos da EPGE) 436, FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).
  16. Thomas J. Holmes & James A. Schmitz, Jr., 1995. "Resistance to new technology and trade between areas," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Win, pages 2-17.
  17. Ripatti, Antti & Vilmunen, Jouko, 2001. "Declining labour share – Evidence of a change in underlying production technology?," Research Discussion Papers 10/2001, Bank of Finland.
  18. Mankiw, N Gregory & Romer, David & Weil, David N, 1992. "A Contribution to the Empirics of Economic Growth," The Quarterly Journal of Economics, MIT Press, vol. 107(2), pages 407-37, May.
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  20. Jeffrey Sachs & Andrew Warner, 1995. "Economic Reform and the Progress of Global Integration," Harvard Institute of Economic Research Working Papers 1733, Harvard - Institute of Economic Research.
  21. Bridgman, Benjamin R. & Livshits, Igor D. & MacGee, James C., 2007. "Vested interests and technology adoption," Journal of Monetary Economics, Elsevier, vol. 54(3), pages 649-666, April.
  22. Clark, Gregory, 1987. "Why Isn't the Whole World Developed? Lessons from the Cotton Mills," The Journal of Economic History, Cambridge University Press, vol. 47(01), pages 141-173, March.
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  24. Pedro Cavalcanti Ferreira & JosÈ Luiz Rossi, 2003. "New Evidence from Brazil on Trade Liberalization and Productivity Growth," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 44(4), pages 1383-1405, November.
  25. Teixeira, A., 2000. "Effects of Trade Policy on Technology Adoption and Investment," Insper Working Papers wpe_4, Insper Working Paper, Insper Instituto de Ensino e Pesquisa.
  26. 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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  28. Winkelmann, Liliana & Winkelmann, Rainer, 1998. "Tariffs, quotas and terms-of-trade: The case of New Zealand," Journal of International Economics, Elsevier, vol. 46(2), pages 313-332, December.
  29. repec:umd:umdeco:rodriguez9901 is not listed on IDEAS
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