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Trade liberalization and heterogeneous within-firm productivity improvements

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  • Maria Bas

    (PJSE - Paris-Jourdan Sciences Economiques - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

  • Ivan Ledezma

    (PJSE - Paris-Jourdan Sciences Economiques - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

Abstract

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, tariffs reduction has little impact on the extensive margin of trade in countries already highly open.

Suggested Citation

  • Maria Bas & Ivan Ledezma, 2008. "Trade liberalization and heterogeneous within-firm productivity improvements," Working Papers halshs-00590303, HAL.
    • Handle: RePEc:hal:wpaper:halshs-00590303
    Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00590303v1
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