IDEAS home Printed from
   My bibliography  Save this paper

Reevaluating the Evidence on Trade and Productivity


  • Kim J. Ruhl

    () (Economics University of Texas Austin)


Researchers have estimated productivity changes surrounding trade liberalization for different countries, using different techniques, and have generally reached the conclusion that gains are positive. In this paper we study how different techniques influence the quantitative results by calculating productivity gains for Chile following the liberalization of the 1970s and 1980s using several methods used in the literature and incorporating new cost and market structures. To do this, we specify and estimate production functions for firms using methods suggested by Olley and Pakes (1996), Levinsohn and Petrin (2003), and Cooper, Haltiwanger, and Willis (2006). We modify these techniques to include decisions on exporting and exit and to allow for convex and nonconvex forms of labor and capital adjustment costs. Additionally, we allow for nontraded goods sectors – which are frequently ignored in this literature – to asses the differential impact of opening to trade on traded and nontraded good sectors. In agreement with other studies, we find aggregate productivity gains are driven mostly by changes in the composition of plants. In addition, we find that nonconvex adjustment costs are crucial to replicating the firm level data on exporting and factor demands and that there are strong interactions between the traded and nontraded good sectors. In our preferred specification, which allows for this richer structure, we find that plant level productivity grows more than that found in other studies.

Suggested Citation

  • Kim J. Ruhl, 2006. "Reevaluating the Evidence on Trade and Productivity," 2006 Meeting Papers 770, Society for Economic Dynamics.
  • Handle: RePEc:red:sed006:770

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    More about this item


    trade liberalization; productivity; dynamic structural estimation;

    JEL classification:

    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:red:sed006:770. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christian Zimmermann). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.