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Trade, productivity and (mis)allocation

Berthou, Antoine, Jong-Hyun Chung, John, Manova, Kalina and Sandoz Dit Bragard, Charlotte (2020) Trade, productivity and (mis)allocation. CEP Discussion Papers (1668). Centre for Economic Performance, LSE, London, UK.

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Abstract

We examine the gains from globalization in the presence of firm heterogeneity and potential resource misallocation. We show theoretically that without distortions, bilateral and export liberalizations increase aggregate welfare and productivity, while import liberalization has ambiguous effects. Resource misallocation can either amplify, dampen or reverse the gains from trade. Using model-consistent measures and unique new data on 14 European countries and 20 industries in 1998-2011, we empirically establish that exogenous shocks to export demand and import competition both generate large aggregate productivity gains. Guided by theory, we provide evidence consistent with these effects operating through reallocations across firms in the presence of distortions: (i) Both export and import expansion increase average firm productivity, but the former also shifts activity towards more productive firms, while the latter acts in reverse. (ii) Both export and import exposure raise the productivity threshold for survival, but this cut-off is not a sufficient statistic for aggregate productivity. (iii) Efficient institutions, factor and product markets amplify the gains from import competition but dampen those from export access.

Item Type: Monograph (Discussion Paper)
Official URL: https://cep.lse.ac.uk/_new/publications/discussion...
Additional Information: © 2020 The Authors
Divisions: LSE
Subjects: H Social Sciences > HF Commerce
J Political Science > JZ International relations
H Social Sciences > HD Industries. Land use. Labor
JEL classification: F - International Economics > F1 - Trade > F10 - General
F - International Economics > F1 - Trade > F14 - Country and Industry Studies of Trade
F - International Economics > F4 - Macroeconomic Aspects of International Trade and Finance > F43 - Economic Growth of Open Economies
O - Economic Development, Technological Change, and Growth > O2 - Development Planning and Policy > O24 - Trade Policy; Factor Movement Policy; Foreign Exchange Policy
O - Economic Development, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity > O40 - General
O - Economic Development, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity > O47 - Measurement of Economic Growth; Aggregate Productivity; Cross-Country Output (Income) Convergence
Date Deposited: 11 Jan 2021 13:30
Last Modified: 27 May 2021 14:56
URI: http://eprints.lse.ac.uk/id/eprint/108224

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