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Trade and productivity: The family connection redux

  • Prettner, Klaus
  • Strulik, Holger

We investigate the effects of demographic change and human capital accumulation on trade and productivity of domestic firms. In so doing we integrate a micro-founded education and fertility decision of households into a model of international trade with firm heterogeneity. Our framework leads to four testable implications: i) the export share of a country increases in the education level of its population, ii) the export share of a country decreases in the birth rate of its population, iii) the average profitability of firms increases in the education level of a country, iv) the average profitability of firms decreases in the birth rate of a country. We find that all four implications are supported by empirical evidence for a panel of OECD countries from 1960 to 2010. Our results suggest that investments in human capital accumulation, especially in higher education, are an important determinant of a country's international competitiveness. Furthermore, falling birth rates need not be a serious concern with respect to productivity and international competitiveness of countries.

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Paper provided by University of Goettingen, Department of Economics in its series Center for European, Governance and Economic Development Research Discussion Papers with number 159.

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Date of creation: 2013
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Handle: RePEc:zbw:cegedp:159
Contact details of provider: Postal: Platz der Göttinger Sieben 3, 37073 Göttingen
Web page: http://www.cege.wiso.uni-goettingen.de/

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  1. Douglas Gollin, 2001. "Nobody's Business but My Own: Self Employment and Small Enterprise in Economic Development," Center for Development Economics 172, Department of Economics, Williams College.
  2. Alexander Ludwig & Dirk Krüger, 2006. "On the Consequences of Demographic Change for Rates of Returns to Capital, and the Distribution of Wealth and Welfare," MEA discussion paper series 06103, Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy.
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