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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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  1. Rivera-Batiz, Luis A & Romer, Paul M, 1991. "Economic Integration and Endogenous Growth," The Quarterly Journal of Economics, MIT Press, vol. 106(2), pages 531-55, May.
  2. Helpman, Elhanan & Grossman, Gene M., 1989. "Product Development and International Trade," Scholarly Articles 3445094, Harvard University Department of Economics.
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  6. 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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  16. Luis A. Rivera-Batiz & Paul M. Romer, 1991. "International Trade with Endogenous Technological Change," NBER Working Papers 3594, National Bureau of Economic Research, Inc.
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  19. Stephen Davis & John Haltiwanger & Ron Jarmin & Javier Miranda, 2006. "Volatility and Dispersion in Business Growth Rates: Publicly Traded Versus Privately Held Firms," Working Papers 06-17, Center for Economic Studies, U.S. Census Bureau.
  20. Cohen, Wesley M & Klepper, Steven, 1996. "A Reprise of Size and R&D," Economic Journal, Royal Economic Society, vol. 106(437), pages 925-51, July.
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