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Trade-revealed TFP

Author Info

  • Patrizio Pagano

    (Bank of Italy)

  • Massimo Sbracia

    (Bank of Italy)

  • Andrea Finicelli

    (Bank of Italy)

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.

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Paper provided by Society for Economic Dynamics in its series 2008 Meeting Papers with number 717.

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Date of creation: 2008
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Handle: RePEc:red:sed008:717
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Find related papers by 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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  1. Robert J. Barro & Jong-Wha Lee, 2000. "International Data on Educational Attainment: Updates and Implications," CID Working Papers 42, Center for International Development at Harvard University.
  2. Caselli, Francesco, 2004. "Accounting for Cross-Country Income Differences," CEPR Discussion Papers 4703, C.E.P.R. Discussion Papers.
  3. Jonathan Eaton & Samuel Kortum, 2004. "An Anatomy of International Trade: Evidence from French Firms," 2004 Meeting Papers 802, Society for Economic Dynamics.
  4. Fernando Alvarez & Robert E. Lucas, 2005. "General Equilibrium Analysis of the Eaton-Kortum Model of International Trade," NBER Working Papers 11764, National Bureau of Economic Research, Inc.
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  6. Angel de la Fuente & Rafael Doménech, 2006. "Human Capital in Growth Regressions: How Much Difference Does Data Quality Make?," Journal of the European Economic Association, MIT Press, vol. 4(1), pages 1-36, 03.
  7. Jonathan Eaton & Samuel Kortum, 2002. "Technology, Geography, and Trade," Econometrica, Econometric Society, vol. 70(5), pages 1741-1779, September.
  8. King, Robert G. & Levine, Ross, 1994. "Capital fundamentalism, economic development, and economic growth," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 40(1), pages 259-292, June.
  9. Ricardo Lagos, 2006. "A model of TFP," Staff Report 345, Federal Reserve Bank of Minneapolis.
  10. Chang-Tai Hsieh, 2002. "What Explains the Industrial Revolution in East Asia? Evidence From the Factor Markets," American Economic Review, American Economic Association, vol. 92(3), pages 502-526, June.
  11. Finicelli, Andrea & Pagano, Patrizio & Sbracia, Massimo, 2009. "Ricardian selection," MPRA Paper 16950, University Library of Munich, Germany.
  12. Andrew B. Bernard & Jonathan Eaton & J. Bradford Jenson & Samuel Kortum, 2000. "Plants and Productivity in International Trade," NBER Working Papers 7688, National Bureau of Economic Research, Inc.
  13. Harald Fadinger & Pablo Fleiss, 2011. "Trade and Sectoral Productivity," Economic Journal, Royal Economic Society, vol. 121(555), pages 958-989, 09.
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  15. Massimo Del Gatto & Gianmarco I. P. Ottaviano & Marcello Pagnini, 2008. "Openness To Trade And Industry Cost Dispersion: Evidence From A Panel Of Italian Firms," Journal of Regional Science, Wiley Blackwell, vol. 48(1), pages 97-129.
  16. Berthold Herrendorf & Akos Valentinyi, 2005. "Which Sectors Make the Poor Countries so Unproductive?," IEHAS Discussion Papers 0519, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.
  17. James E. Anderson & Eric van Wincoop, 2004. "Trade Costs," Journal of Economic Literature, American Economic Association, vol. 42(3), pages 691-751, September.
  18. Michael E. Waugh, 2010. "International Trade and Income Differences," American Economic Review, American Economic Association, vol. 100(5), pages 2093-2124, December.
  19. Trefler, Daniel, 1995. "The Case of the Missing Trade and Other Mysteries," American Economic Review, American Economic Association, vol. 85(5), pages 1029-46, December.
  20. Peter J. Klenow & Mark Bils, 2000. "Does Schooling Cause Growth?," American Economic Review, American Economic Association, vol. 90(5), pages 1160-1183, December.
  21. Keith E. Maskus, 1991. "Comparing International Trade Data and Product and National Characteristics Data for the Analysis of Trade Models," NBER Chapters, in: International Economic Transactions: Issues in Measurement and Empirical Research, pages 17-60 National Bureau of Economic Research, Inc.
  22. Serge Shikher, 2012. "Putting industries into the Eaton--Kortum model," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 21(6), pages 807-837, November.
  23. Trefler, Daniel, 1993. "International Factor Price Differences: Leontief Was Right!," Journal of Political Economy, University of Chicago Press, vol. 101(6), pages 961-87, December.
  24. Paul S. Armington, 1969. "A Theory of Demand for Products Distinguished by Place of Production (Une théorie de la demande de produits différenciés d'après leur origine) (Una teoría de la demanda de productos distinguiénd," IMF Staff Papers, Palgrave Macmillan, vol. 16(1), pages 159-178, March.
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Cited by:

  1. 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, 06.
  2. Michael E. Waugh, 2010. "International Trade and Income Differences," American Economic Review, American Economic Association, vol. 100(5), pages 2093-2124, December.
  3. Finicelli, Andrea & Pagano, Patrizio & Sbracia, Massimo, 2009. "Ricardian selection," MPRA Paper 16950, University Library of Munich, Germany.
  4. Shikher, Serge, 2011. "Capital, technology, and specialization in the neoclassical model," Journal of International Economics, Elsevier, vol. 83(2), pages 229-242, March.
  5. B. Mandel & J. Gruber & F. Di Mauro & M. Del Gatto, 2012. "The “Revealed” Competitiveness of U.S. Exports," Working Paper CRENoS 201232, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.
  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. Bolatto, Stefano & Sbracia, Massimo, 2014. "Deconstructing the Gains from Trade: Selection of Industries vs. Reallocation of Workers," MPRA Paper 56638, University Library of Munich, Germany.
  8. Serge SHIKHER, . "Determinants of Specialization and the Role of Trade Costs," EcoMod2010 259600157, EcoMod.
  9. Stefano Bolatto, . "Trade across Countries and Manufacturing Sectors with Heterogeneous Trade Elasticities," Development Working Papers 360, Centro Studi Luca d\'Agliano, University of Milano.
  10. Del Gatto, Massimo & di Mauro, Filippo & 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.

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