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International Trade and Growth: The Impact of Seletion and Imitation

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  • Sarah Stolting

Abstract

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.

Suggested Citation

  • Sarah Stolting, 2009. "International Trade and Growth: The Impact of Seletion and Imitation," Economics Working Papers ECO2009/21, European University Institute.
    • Handle: RePEc:eui:euiwps:eco2009/21
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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