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Trade, Productivity and semi-endogenous Growth

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  • Christian Bauer

Abstract

We investigate the impact of incremental trade liberalization in a dynamic model of endogenous growth with heterogeneous firms and costly trade. Growth originates from horizontal specialization and the steady state productivity growth rate is positive. Innovations require costly R&D and are conducted by profit-seeking researchers. Including physical capital as a factor of production, we find that after appropriate adjustments in the production structure, previous results on the reallocation of resources and the selection of firms following trade liberalization continue to hold. We show, however, that unlike in the Melitz (2003) model, the reallocation effect does not work through increases in the factor price in production.

Suggested Citation

  • Christian Bauer, 2008. "Trade, Productivity and semi-endogenous Growth," Working Papers 056, Bavarian Graduate Program in Economics (BGPE).
  • Handle: RePEc:bav:wpaper:056_bauer
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    File URL: http://www.bgpe.de/texte/DP/056_bauer.pdf
    File Function: First version, 2008
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    References listed on IDEAS

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    More about this item

    Keywords

    Productivity; entry costs; heterogeneous firms; trade Liberalization;

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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