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Gains from trade and measured total factor productivity


  • Ferreira, Pedro Cavalcanti
  • Trejos, Alberto


We develop and calibrate a model where diferences in factor en-dowments lead countries to trade di¤erent goods, so that the existence of international trade changes the sectorial composition of output from one country to another. Gains from trade re ect in total factor productivity. We perform a development decomposition, to assess the impact of trade and barriers to trade on measured TFP. In our sample, the median size of that e¤ect is about 6.5% of output, with a median of 17% and a maximum of 89%. Also, the model predicts that changes in the terms of trade cause a change of productivity, and that efect has an average elasticity of 0.71.

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  • Ferreira, Pedro Cavalcanti & Trejos, Alberto, 2010. "Gains from trade and measured total factor productivity," FGV/EPGE Economics Working Papers (Ensaios Economicos da EPGE) 711, FGV/EPGE - Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).
  • Handle: RePEc:fgv:epgewp:711

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    9. Felipe Meza & Erwan Quintin, 2005. "Financial crises and total factor productivity," Center for Latin America Working Papers 0105, Federal Reserve Bank of Dallas.
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    11. Andres Rodriguez-Clare, 2007. "Trade, Diffusion and the Gains from Openness," NBER Working Papers 13662, National Bureau of Economic Research, Inc.
    12. Robert Summers & Alan Heston, 1991. "The Penn World Table (Mark 5): An Expanded Set of International Comparisons, 1950–1988," The Quarterly Journal of Economics, Oxford University Press, vol. 106(2), pages 327-368.
    13. Timothy J. Kehoe & Kim J. Ruhl, 2008. "Are Shocks to the Terms of Trade Shocks to Productivity?," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 11(4), pages 804-819, October.
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