2024-03-28T17:36:37Zhttp://digital.csic.es/dspace-oai/requestoai:digital.csic.es:10261/353642019-03-26T08:34:33Zcom_10261_58com_10261_7col_10261_689
DIGITAL.CSIC
author
Impullitti, Giammario
author
Licandro, Omar
2011-05-06T10:27:12Z
2011-05-06T10:27:12Z
2010-09-01
UFAE and IAE Working Papers ; 841.10.
http://hdl.handle.net/10261/35364
The availability of rich firm-level data sets has recently led researchers to uncover new evidence on the effects of trade liberalization. First, trade openness forces the least productive firms to exit the market. Secondly, it induces surviving firms to increase their innovation efforts and thirdly, it increases the degree of product market competition. In this paper we propose a model aimed at providing a coherent interpretation of these findings. We introducing firm heterogeneity into an innovation-driven growth model, where incumbent firms operating in oligopolistic industries perform cost-reducing innovations. In this framework, trade liberalization leads to higher product market competition, lower markups and higher quantity produced. These changes in markups and quantities, in turn, promote innovation and productivity growth through a direct competition effect, based on the increase in the size of the market, and a selection effect, produced by the reallocation of resources towards more productive firms. Calibrated to match US aggregate and firm-level statistics, the model predicts that a 10 percent reduction in variable trade costs reduces markups by 1:15 percent, firm surviving probabilities by 1 percent, and induces an increase in productivity growth of about 13 percent. More than 90 percent of the trade-induced growth increase can be attributed to the selection effect.
eng
openAccess
International Trade
Trade Liberalization
Heterogeneous Firms
Endogenous Market Structure
Productivity Growth
Endogenous Growth
Trade, Firm selection, and innovation: the competition channel
documento de trabajo
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URL
https://digital.csic.es/bitstream/10261/35364/1/84110.pdf
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84110.pdf
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https://digital.csic.es/bitstream/10261/35364/4/84110.pdf.txt
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84110.pdf.txt