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Trade and technology adoption in distorted economies

Author

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  • Farrokhi, Farid
  • Lashkaripour, Ahmad
  • Pellegrina, Heitor S.

Abstract

This paper examines how labor market imperfections distort firm-level technology choices and alter the gains from trade in developing countries. Motivated by evidence that firms using modern technologies are disproportionately exposed to labor market distortions, we introduce firm-level technology choices and labor market distortions into an otherwise standard quantitative trade model. We then provide formulas for the welfare and labor productivity gains from trade liberalization, highlighting the role of distortions and technology choice. Our quantitative analysis reveals that labor market distortions provide a possible explanation for the inefficiently low levels of modern technology adoption in developing countries. Moreover, labor market distortions erode one-third of the potential labor productivity gains from trade liberalization among low-income countries.

Suggested Citation

  • Farrokhi, Farid & Lashkaripour, Ahmad & Pellegrina, Heitor S., 2024. "Trade and technology adoption in distorted economies," Journal of International Economics, Elsevier, vol. 150(C).
    • Handle: RePEc:eee:inecon:v:150:y:2024:i:c:s0022199624000461
    DOI: 10.1016/j.jinteco.2024.103922
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    Cited by:

    1. Bonga-Bonga, Lumengo & Nzimande, Ntokozo & Osuma, Godswill Osagie, 2024. "The role of moderating factors in the nexus natural resource rents and renewable energy adoption," MPRA Paper 121920, University Library of Munich, Germany.
    2. Siying Ding & Ahmad Lashkaripour & Volodymyr Lugovskyy, 2024. "A Global Perspective on the Incidence of Monopoly Distortions," CESifo Working Paper Series 11211, CESifo.

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