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International Trade and Growth: The Impact of Seletion and Imitation

  • Sarah Stolting
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    This paper develops an endogenous growth model with heterogeneous firms to analyze the impact of intra-industry trade on productivity growth. Growth is generated by selection, and sustained by entrants imitating successful incumbents. Firms are subject to idiosyncratic productivity shocks and some firms, mostly those with relatively low productivity levels, are forced to exit. This results in an increase in average productivity of the economy. The intraindustry effect of trade works through self-selection of the most productive firms into the export market. It leads to a reallocation of resources towards more efficient firms. Since the effect of selection and imitation on growth is amplified by the trade-induced selection process, opening up to trade increases the growth rate of productivity.

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    Paper provided by European University Institute in its series Economics Working Papers with number ECO2009/21.

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    Date of creation: 2009
    Date of revision:
    Handle: RePEc:eui:euiwps:eco2009/21
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    1. Melitz, Marc J, 2002. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," CEPR Discussion Papers 3381, C.E.P.R. Discussion Papers.
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    18. Alain Gabler & Omar Licandro, 2007. "Endogenous Growth through Selection and Imitation," Economics Working Papers ECO2007/26, European University Institute.
    19. Jonathan Eaton & Samuel Kortum, 2002. "Technology, Geography, and Trade," Econometrica, Econometric Society, vol. 70(5), pages 1741-1779, September.
    20. repec:tpr:qjecon:v:122:y:2007:i:3:p:1103-1144 is not listed on IDEAS
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