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From Groundnuts to Globalization: A Structural Estimate of Trade and Growth

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  • Christian Broda
  • Joshua Greenfield
  • David Weinstein

Abstract

Starting with Romer [1987] and Rivera-Batiz-Romer [1991] economists have been able to model how trade enhances growth through the creation and import of new varieties. In this framework, international trade increases economic output through two channels. First, trade raises productivity levels because producers gain access to new imported varieties. Second, increases in the number of varieties drives down the cost of innovation and results in ever more variety creation. Using highly disaggregate trade data, e.g. Gabon's imports of Gambian groundnuts, we structurally estimate the impact that new imports have had in approximately 4000 markets per country. We then move from groundnuts to globalization by building an exact TFP index that aggregates these micro gains to obtain an estimate of trade on productivity growth for each country. We find that in the typical country in the world, new imported varieties account for 15 percent of its productivity growth. These effects are larger in developing countries where the median impact of new imported varieties equals a quarter of national productivity growth.

Suggested Citation

  • Christian Broda & Joshua Greenfield & David Weinstein, 2006. "From Groundnuts to Globalization: A Structural Estimate of Trade and Growth," NBER Working Papers 12512, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:12512
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    More about this item

    JEL classification:

    • E00 - Macroeconomics and Monetary Economics - - General - - - General
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity

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