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Trade and Growth with Heterogeneous Firms

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  • Baldwin, Richard
  • Robert-Nicoud, Frédéric

Abstract

This paper explores the impact of trade on growth when firms are heterogeneous. Our findings can be viewed as relevant to the trade and growth literature on one hand and the heterogeneous-firms trade theory on the other. Our main finding ? that freer trade is both anti-growth and welfare worsening from a purely dynamic perspective ? contrasts with most findings in the endogenous growth literature. We also show that market-entry costs are anti-growth, but heterogeneity per se is pro-growth. As concerns the heterogeneous-firms literature our main finding is a static-vs.-dynamic trade-off in terms of productivity gains. Freer trade raises measured productivity in a level sense but slows measured productivity growth.

Suggested Citation

  • Baldwin, Richard & Robert-Nicoud, Frédéric, 2005. "Trade and Growth with Heterogeneous Firms," CEPR Discussion Papers 4965, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:4965
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    More about this item

    Keywords

    Trade and endogenous growth; Heterogeneous firms; Dynamic versus static efficiency;
    All these keywords.

    JEL classification:

    • H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm
    • P16 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Capitalist Institutions; Welfare State

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    This paper has been announced in the following NEP Reports:

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