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Trade liberalization and heterogeneous within-firm productivity improvements

  • Ledezma, Ivan
  • Bas, Maria

This paper develops an intra-industry model of trade with heterogeneous firms to investigate the impact of trade on the evolution of within firm productivity. The main contribution is to incorporate endogenous labor productivity gains. Heterogeneous firms have different incentives to invest in foreign technology which in turns enhances efficiency heterogeneously. Trade liberalization reduces the price of imported capital equipment and increases factor demands. These mechanisms introduce two novel results. First, aggregate productivity increases due to within-firm productivity improvements. Second, tarifs reduction has little impact on the extensive margin of trade in countries already highly open.

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Paper provided by Paris Dauphine University in its series Economics Papers from University Paris Dauphine with number 123456789/6916.

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Date of creation: Jun 2008
Date of revision:
Publication status: Published in PSE Working Papers, 2008
Handle: RePEc:dau:papers:123456789/6916
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  1. Andrew B. Bernard & J. Bradford Jensen, 2001. "Who Dies? International Trade, Market Structure, and Industrial Restructuring," NBER Working Papers 8327, National Bureau of Economic Research, Inc.
  2. Nina Pavcnik, 2000. "Trade Liberalization, Exit, and Productivity Improvements: Evidence from Chilean Plants," NBER Working Papers 7852, National Bureau of Economic Research, Inc.
  3. Sofronis Clerides & Saul Lach & James Tybout, 1996. "Is "Learning-by-Exporting" Important? Micro-Dynamic Evidence from Colombia, Mexico and Morocco," NBER Working Papers 5715, National Bureau of Economic Research, Inc.
  4. Ericson, Richard & Pakes, Ariel, 1995. "Markov-Perfect Industry Dynamics: A Framework for Empirical Work," Review of Economic Studies, Wiley Blackwell, vol. 62(1), pages 53-82, January.
  5. Jan De Loecker & Jozef Konings, 2003. "Creative Destruction and Productivity Growth in an Emerging Economy Evidence from Slovenian Manufacturing," LICOS Discussion Papers 13803, LICOS - Centre for Institutions and Economic Performance, KU Leuven.
  6. Sanghamitra Das & Mark J. Roberts & James R. Tybout, 2001. "Market entry costs, producer heterogeneity and export dynamics," Indian Statistical Institute, Planning Unit, New Delhi Discussion Papers 03-10, Indian Statistical Institute, New Delhi, India.
  7. Raphael Bergoeing Vela & Andrés Hernando & Andrea Repetto, 2010. "Market Reforms and Efficiency Gains in Chile," Estudios de Economia, University of Chile, Department of Economics, vol. 37(2 Year 20), pages 217-242, December.
  8. Bas, Maria & Ledezma, Ivan, 2007. "Market Access and the Evolution of within Plant Productivity in Chile," Economics Papers from University Paris Dauphine 123456789/6913, Paris Dauphine University.
  9. Daniel Trefler, 2001. "The Long and Short of the Canada-U.S. Free Trade Agreement," NBER Working Papers 8293, National Bureau of Economic Research, Inc.
  10. Andrew B. Bernard & Jonathan Eaton & J. Bradford Jensen & Samuel Kortum, 2000. "Plants and Productivity in International Trade," Boston University - Institute for Economic Development 105, Boston University, Institute for Economic Development.
  11. George S Olley & Ariel Pakes, 1992. "The Dynamics Of Productivity In The Telecommunications Equipment Industry," Working Papers 92-2, Center for Economic Studies, U.S. Census Bureau.
  12. James R. Tybout, 2001. "Plant- and Firm-Level Evidence on "New" Trade Theories," NBER Working Papers 8418, National Bureau of Economic Research, Inc.
  13. Yeaple, Stephen Ross, 2005. "A simple model of firm heterogeneity, international trade, and wages," Journal of International Economics, Elsevier, vol. 65(1), pages 1-20, January.
  14. Hopenhayn, Hugo & Rogerson, Richard, 1993. "Job Turnover and Policy Evaluation: A General Equilibrium Analysis," Journal of Political Economy, University of Chicago Press, vol. 101(5), pages 915-38, October.
  15. Roberts, Mark J & Tybout, James R, 1997. "The Decision to Export in Colombia: An Empirical Model of Entry with Sunk Costs," American Economic Review, American Economic Association, vol. 87(4), pages 545-64, September.
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