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Trade, Skills and Productivity

Author

Listed:
  • Giordano Mion
  • Joana Silva

Abstract

We examine how firms adjust production and technology in response to exogenous trade shocks. We develop a model that distinguishes revenue TFP from quantity TFP and embeds skill upgrading in technology choices. Firms respond to trade shocks by adjusting their quantity-quality trade-off and skill composition. These decisions impact firms’ quantity and revenue TFP, marginal costs, prices, and markups. Using detailed worker-firm-product data from Brazil, we show how trade shocks, instrumented by exogenous changes in exchange rates, GDP, and tariffs, affect margins. Results suggest fundamentally different firm responses to export and import changes: exports primarily induce upgrading in skills and product quality, whereas imports drive stronger efficiency and quantity-productivity gains.

Suggested Citation

  • Giordano Mion & Joana Silva, 2026. "Trade, Skills and Productivity," CESifo Working Paper Series 12702, CESifo.
    • Handle: RePEc:ces:ceswps:_12702
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    JEL classification:

    • F61 - International Economics - - Economic Impacts of Globalization - - - Microeconomic Impacts
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

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