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Innovation, Firm Dynamics, and International Trade

  • Andrew Atkeson
  • Ariel Burstein

We present a general equilibrium model of the response of firms' decisions to operate, innovate, and engage in international trade to a change in the marginal cost of international trade. We find that, although a change in trade costs can have a substantial impact on heterogeneous firms' exit, export, and process innovation decisions, the impact of changes in these decisions on welfare is largely offset by the response of product innovation. Our results suggest that microeconomic evidence on firms' responses to changes in international trade costs may not be informative about the implications of changes in these trade costs for aggregate welfare. (c) 2010 by The University of Chicago. All rights reserved..

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Paper provided by David K. Levine in its series Levine's Working Paper Archive with number 122247000000001423.

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Date of creation: 24 Aug 2007
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Handle: RePEc:cla:levarc:122247000000001423
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  13. Jonathan Eaton & Samuel Kortum, 2001. "Technology, Trade, and Growth: A Unified Fremework," Boston University - Department of Economics - The Institute for Economic Development Working Papers Series dp-110, Boston University - Department of Economics.
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  17. University of Minnesota & Erzo G.J. Luttmer, 2007. "New Goods and the Size Distribution of Firms," 2007 Meeting Papers 266, Society for Economic Dynamics.
  18. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 1002-37, October.
  19. David Weinstein & Christian Broda, 2004. "Globalization and the Gains from Variety," 2004 Meeting Papers 530, Society for Economic Dynamics.
  20. Paula Bustos, 2005. "The impact of trade liberalization on skill upgrading. Evidence from Argentina," Economics Working Papers 1189, Department of Economics and Business, Universitat Pompeu Fabra, revised Jul 2011.
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  24. Timothy Dunne & J. Bradford Jensen & Mark J. Roberts, 2009. "Producer Dynamics: New Evidence from Micro Data," NBER Books, National Bureau of Economic Research, Inc, number dunn05-1, June.
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