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Trade-revealed TFP

Author

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  • Finicelli, Andrea
  • Pagano, Patrizio
  • Sbracia, Massimo

Abstract

We introduce a novel methodology to measure the relative TFP of the tradeable sector across countries, based on the relationship between trade and TFP in the model of Eaton and Kortum (2002). The logic of our approach is to measure TFP not from its "primitive" (the production function) but from its observed implications. In particular, we estimate TFPs as the productivities that best fit data on trade, production, and wages. Applying this methodology to a sample of 19 OECD countries, we estimate the TFP of each country's manufacturing sector from 1985 to 2002. Our measures are easy to compute and, with respect to the standard development-accounting approach, are no longer mere residuals. Moreover, they do not yield common "anomalies", such as the higher TFP of Italy relative to the US.

Suggested Citation

  • Finicelli, Andrea & Pagano, Patrizio & Sbracia, Massimo, 2009. "Trade-revealed TFP," MPRA Paper 16951, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:16951
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    Cited by:

    1. Simola, Antti & Kinnunen, Jouko & Törmä, Hannu & Kola, Jukka, 2010. "Bioenergy production in Finland and its effects on regional growth and employment," IAMO Forum 2010: Institutions in Transition – Challenges for New Modes of Governance 52705, Leibniz Institute of Agricultural Development in Central and Eastern Europe (IAMO).
    2. di Mauro, Filippo & Del Gatto, Massimo & Gruber, Joseph & Mandel, Benjamin, 2012. "The structural determinants of the US competitiveness in the last decades: a "trade-revealing" analysis," Working Paper Series 1443, European Central Bank.
    3. Gordon H. Hanson & Nelson Lind & Marc-Andreas Muendler, 2015. "The Dynamics of Comparative Advantage," CESifo Working Paper Series 5622, CESifo.
    4. Stefano Bolatto & Massimo Sbracia, 2016. "Deconstructing the Gains from Trade: Selection of Industries vs Reallocation of Workers," Review of International Economics, Wiley Blackwell, vol. 24(2), pages 344-363, May.
    5. Michael E. Waugh, 2010. "International Trade and Income Differences," American Economic Review, American Economic Association, vol. 100(5), pages 2093-2124, December.
    6. Patrizio Pagano & Massimo Sbracia, 2014. "The secular stagnation hypothesis: a review of the debate and some insights," Questioni di Economia e Finanza (Occasional Papers) 231, Bank of Italy, Economic Research and International Relations Area.
    7. Finicelli, Andrea & Pagano, Patrizio & Sbracia, Massimo, 2013. "Ricardian selection," Journal of International Economics, Elsevier, vol. 89(1), pages 96-109.
    8. Gregory Corcos & Massimo Del Gatto & Giordano Mion & Gianmarco I.P. Ottaviano, 2012. "Productivity and Firm Selection: Quantifying the ‘New’ Gains from Trade," Economic Journal, Royal Economic Society, vol. 122(561), pages 754-798, June.
    9. Stefano Bolatto, "undated". "Trade across Countries and Manufacturing Sectors with Heterogeneous Trade Elasticities," Development Working Papers 360, Centro Studi Luca d'Agliano, University of Milano.
    10. Piero Cipollone & Pasqualino Montanaro & Paolo Sestito, 2010. "Value-Added Measures in Italian High Schools: Problems and Findings," Giornale degli Economisti, GDE (Giornale degli Economisti e Annali di Economia), Bocconi University, vol. 69(2), pages 81-114, July.
    11. Levchenko, Andrei A. & Zhang, Jing, 2016. "The evolution of comparative advantage: Measurement and welfare implications," Journal of Monetary Economics, Elsevier, vol. 78(C), pages 96-111.
    12. Christian Hepenstrick & Alexander Tarasov, 2015. "Trade Openness and Cross-country Income Differences," Review of International Economics, Wiley Blackwell, vol. 23(2), pages 271-302, May.
    13. Massimo Del Gatto & Filippo di Mauro & Joseph W. Gruber & Benjamin R. Mandel, 2011. "The revealed competitiveness of U.S. exports," International Finance Discussion Papers 1026, Board of Governors of the Federal Reserve System (U.S.).
    14. Shikher, Serge, 2011. "Capital, technology, and specialization in the neoclassical model," Journal of International Economics, Elsevier, vol. 83(2), pages 229-242, March.

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    More about this item

    Keywords

    Multi-factor productivity; TFP measurement; Eaton-Kortum model;
    All these keywords.

    JEL classification:

    • F1 - International Economics - - Trade
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity

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