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Technology Diffusion through Trade with Heterogeneous Firms

I investigate the long-run implications of trade and technology di®usion through trade, when ¯rms are heterogeneous and trade is costly. The paper integrates ¯rm heterogeneity and trade into product innovation growth models from endogenous growth theory. Two speci¯ca- tions of the R&D process are considered. In the ¯rst, R&D uses labor and intermediate goods; in the second, it uses labor and available technology. I ¯nd that under both speci¯cations, exposure to trade increases average productivity. Furthermore, under the ¯rst speci¯cation exposure to trade always has a positive e®ect on economic growth, while it has an ambiguous e®ect on growth under the second.

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File URL: http://www.bus.lsu.edu/economics/papers/pap06_15.pdf
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Paper provided by Department of Economics, Louisiana State University in its series Departmental Working Papers with number 2006-15.

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Handle: RePEc:lsu:lsuwpp:2006-15
Contact details of provider: Postal: Baton Rouge, LA 70803-6306
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Web page: http://www.business.lsu.edu/economics
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  1. Philippe Aghion & Peter Howitt, 1990. "A Model of Growth Through Creative Destruction," NBER Working Papers 3223, National Bureau of Economic Research, Inc.
  2. Pavcnik, Nina, 2002. "Trade Liberalization, Exit, and Productivity Improvement: Evidence from Chilean Plants," Review of Economic Studies, Wiley Blackwell, vol. 69(1), pages 245-76, January.
  3. repec:rus:hseeco:122439 is not listed on IDEAS
  4. Gene M. Grossman & Elhanan Helpman, 1988. "Product Development and International Trade," NBER Working Papers 2540, National Bureau of Economic Research, Inc.
  5. repec:rus:hseeco:121669 is not listed on IDEAS
  6. Luis A. Rivera-Batiz & Paul M. Romer, 1990. "Economic Integration and Endogenous Growth," NBER Working Papers 3528, National Bureau of Economic Research, Inc.
  7. Michelle P. Connolly & Diego Valderrama, 2005. "North-South technological diffusion and dynamic gains from trade," Working Paper Series 2004-24, Federal Reserve Bank of San Francisco.
  8. Paul M Romer, 1999. "Endogenous Technological Change," Levine's Working Paper Archive 2135, David K. Levine.
  9. 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.
  10. Baldwin, Richard & Robert-Nicoud, Frédéric, 2005. "Trade and Growth with Heterogeneous Firms," CEPR Discussion Papers 4965, C.E.P.R. Discussion Papers.
  11. Aw, Bee Yan & Chung, Sukkyun & Roberts, Mark J, 2000. "Productivity and Turnover in the Export Market: Micro-level Evidence from the Republic of Korea and Taiwan (China)," World Bank Economic Review, World Bank Group, vol. 14(1), pages 65-90, January.
  12. Bernard, A., 1997. "Exceptional Exporter Performance: Cause, Effect, or Both?," Working papers 97-21, Massachusetts Institute of Technology (MIT), Department of Economics.
  13. Aghion, Philippe & Howitt, Peter, 1992. "A Model of Growth Through Creative Destruction," Scholarly Articles 12490578, Harvard University Department of Economics.
  14. Elhanan Helpman & Marc J. Melitz & Stephen R. Yeaple, 2004. "Export Versus FDI with Heterogeneous Firms," American Economic Review, American Economic Association, vol. 94(1), pages 300-316, March.
  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.
  16. Krugman, Paul, 1980. "Scale Economies, Product Differentiation, and the Pattern of Trade," American Economic Review, American Economic Association, vol. 70(5), pages 950-59, December.
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