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How Barriers to International Trade Affect TFP

  • Arilton Teixeira


    (FUCAPE Business School)

  • Berthold Herrendorf


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, infinite 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 Fucape Business School in its series Fucape Working Papers with number 21.

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Length: 15
Date of creation: Dec 2009
Date of revision:
Publication status: Published in Fucape Working Papers Dezembro 2010
Handle: RePEc:bbz:fcpwps:21
Contact details of provider: Postal: Fucape Business School Brazilian Business Review Av. Fernando Ferrari, 1358, Boa Vista CEP 29075-505 Vitória-ES
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Fax: +55 27 4009-4422
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  13. 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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  27. Robert E. Hall & Charles I. Jones, 1999. "Why Do Some Countries Produce So Much More Output Per Worker Than Others?," The Quarterly Journal of Economics, MIT Press, vol. 114(1), pages 83-116, February.
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  31. 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.
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