IDEAS home Printed from https://ideas.repec.org/a/eee/inecon/v74y2008i2p422-440.html
   My bibliography  Save this article

Endogenous firm heterogeneity and the dynamics of trade liberalization

Author

Listed:
  • Ederington, Josh
  • McCalman, Phillip

Abstract

In this paper, we build a dynamic model with endogenous firm-level productivity that involves ex ante identical firms behaving differently in equilibrium. Heterogeneity arises in equilibrium as firms choose different dates to adopt a new technology. We investigate the effects of international trade on technological diffusion and show that trade has a generally positive impact on the equilibrium rate of adoption (and hence on firm-level productivity). In addition, the model can replicate the stylized fact that exporters are larger and more productive than non-exporters. Finally, we show how our model can be used to interpret the emerging empirical evidence on the firm-level productivity effects of CUSFTA.

Suggested Citation

  • Ederington, Josh & McCalman, Phillip, 2008. "Endogenous firm heterogeneity and the dynamics of trade liberalization," Journal of International Economics, Elsevier, vol. 74(2), pages 422-440, March.
    • Handle: RePEc:eee:inecon:v:74:y:2008:i:2:p:422-440
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0022-1996(07)00101-8
    Download Restriction: Full text for ScienceDirect subscribers only
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Nina Pavcnik, 2002. "Trade Liberalization, Exit, and Productivity Improvements: Evidence from Chilean Plants," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 69(1), pages 245-276.
    2. Head, Keith & Ries, John, 1999. "Rationalization effects of tariff reductions," Journal of International Economics, Elsevier, vol. 47(2), pages 295-320, April.
    3. Marc J. Melitz & Giancarlo I. P. Ottaviano, 2021. "Market Size, Trade, and Productivity," World Scientific Book Chapters, in: Firms and Workers in a Globalized World Larger Markets, Tougher Competition, chapter 4, pages 87-108, World Scientific Publishing Co. Pte. Ltd..
    4. Joachim Wagner, 2016. "Exports and Productivity: A Survey of the Evidence from Firm Level Data," World Scientific Book Chapters, in: Microeconometrics of International Trade, chapter 1, pages 3-41, World Scientific Publishing Co. Pte. Ltd..
    5. Gianmarco Ottaviano & Takatoshi Tabuchi & Jacques-François Thisse, 2021. "Agglomeration And Trade Revisited," World Scientific Book Chapters, in: Firms and Workers in a Globalized World Larger Markets, Tougher Competition, chapter 3, pages 59-85, World Scientific Publishing Co. Pte. Ltd..
    6. John Baldwin & Wulong Gu, 2003. "Export-market participation and productivity performance in Canadian manufacturing," Canadian Journal of Economics, Canadian Economics Association, vol. 36(3), pages 634-657, August.
    7. Andrew B. Bernard & Jonathan Eaton & J. Bradford Jensen & Samuel Kortum, 2003. "Plants and Productivity in International Trade," American Economic Review, American Economic Association, vol. 93(4), pages 1268-1290, September.
    8. Josh Ederington & Phillip McCalman, 2009. "International Trade And Industrial Dynamics," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 50(3), pages 961-989, August.
    9. Jennifer F. Reinganum, 1981. "On the Diffusion of New Technology: A Game Theoretic Approach," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 48(3), pages 395-405.
    10. Jovanovic, Boyan & Lach, Saul, 1997. "Product Innovation and the Business Cycle," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 38(1), pages 3-22, February.
    11. Andrew B. Bernard & Stephen J. Redding & Peter K. Schott, 2007. "Comparative Advantage and Heterogeneous Firms," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 74(1), pages 31-66.
    12. Andrew B. Bernard & J. Bradford Jensen, 2004. "Why Some Firms Export," The Review of Economics and Statistics, MIT Press, vol. 86(2), pages 561-569, May.
    13. Sofronis K. Clerides & Saul Lach & James R. Tybout, 1998. "Is Learning by Exporting Important? Micro-Dynamic Evidence from Colombia, Mexico, and Morocco," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 113(3), pages 903-947.
    14. Chad Syverson, 2004. "Market Structure and Productivity: A Concrete Example," Journal of Political Economy, University of Chicago Press, vol. 112(6), pages 1181-1222, December.
    15. Mary Hallward-Driemeier & Giuseppe Iarossi & Kenneth L. Sokoloff, 2002. "Exports and Manufacturing Productivity in East Asia: A Comparative Analysis with Firm-Level Data," NBER Working Papers 8894, National Bureau of Economic Research, Inc.
    16. Crowley, Meredith A., 2006. "Do safeguard tariffs and antidumping duties open or close technology gaps?," Journal of International Economics, Elsevier, vol. 68(2), pages 469-484, March.
    17. Marc J. Melitz, 2003. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," Econometrica, Econometric Society, vol. 71(6), pages 1695-1725, November.
    18. Miyagiwa, Kaz & Ohno, Yuka, 1995. "Closing the Technology Gap under Protection," American Economic Review, American Economic Association, vol. 85(4), pages 755-770, September.
    19. Georg Götz, 1999. "Monopolistic Competition and the Diffusion of New Technology," RAND Journal of Economics, The RAND Corporation, vol. 30(4), pages 679-693, Winter.
    20. Lileeva, Alla, 2008. "Trade Liberalization and Productivity Dynamics: Evidence from Canada," Economic Analysis (EA) Research Paper Series 2008051e, Statistics Canada, Analytical Studies Branch.
    21. Bernard, Andrew B. & Bradford Jensen, J., 1999. "Exceptional exporter performance: cause, effect, or both?," Journal of International Economics, Elsevier, vol. 47(1), pages 1-25, February.
    22. Joachim Wagner, 2006. "Exports, foreign direct investment, and productivity: evidence from German firm level data," Applied Economics Letters, Taylor & Francis Journals, vol. 13(6), pages 347-349.
    23. Drew Fudenberg & Jean Tirole, 1985. "Preemption and Rent Equalization in the Adoption of New Technology," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 52(3), pages 383-401.
    24. Yeaple, Stephen Ross, 2005. "A simple model of firm heterogeneity, international trade, and wages," Journal of International Economics, Elsevier, vol. 65(1), pages 1-20, January.
    25. Roberto Alvarez & Ricardo A. López, 2005. "Exporting and performance: evidence from Chilean plants," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 38(4), pages 1384-1400, November.
    26. Roberts, Mark J & Tybout, James R, 1997. "The Decision to Export in Colombia: An Empirical Model of Entry with Sunk Costs," American Economic Review, American Economic Association, vol. 87(4), pages 545-564, September.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Flora Bellone & Patrick Musso & Lionel Nesta & Michel Quere, 2008. "The U-Shaped Productivity Dynamics of French Exporters," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 144(4), pages 636-659, December.
    2. Yang, Yong & Mallick, Sushanta, 2014. "Explaining cross-country differences in exporting performance: The role of country-level macroeconomic environment," International Business Review, Elsevier, vol. 23(1), pages 246-259.
    3. Neil Foster-McGregor, 2012. "Innovation and Technology Transfer across Countries," wiiw Research Reports 380, The Vienna Institute for International Economic Studies, wiiw.
    4. Melitz, Marc J. & Redding, Stephen J., 2014. "Heterogeneous Firms and Trade," Handbook of International Economics, in: Gopinath, G. & Helpman, . & Rogoff, K. (ed.), Handbook of International Economics, edition 1, volume 4, chapter 0, pages 1-54, Elsevier.
    5. repec:spo:wpecon:info:hdl:2441/6128 is not listed on IDEAS
    6. Andrew B. Bernard & J. Bradford Jensen & Stephen J. Redding & Peter K. Schott, 2012. "The Empirics of Firm Heterogeneity and International Trade," Annual Review of Economics, Annual Reviews, vol. 4(1), pages 283-313, July.
    7. Roberto Álvarez & Ricardo López, 2012. "Trade Liberalization and Industry Dynamics," Open Economies Review, Springer, vol. 23(4), pages 579-595, September.
    8. repec:hal:wpspec:info:hdl:2441/6128 is not listed on IDEAS
    9. Roberto Alvarez & Ricardo A. López, 2008. "Is Exporting a Source of Productivity Spillovers?," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 144(4), pages 723-749, December.
    10. Elhanan Helpman, 2006. "Trade, FDI, and the Organization of Firms," Journal of Economic Literature, American Economic Association, vol. 44(3), pages 589-630, September.
    11. Ngo Van Long & Horst Raff & Frank Staehler, 2007. "The Effects of Trade Liberalization on Productivity and Welfare: The Role of Firm Heterogeneity, R&D and Market Structure," Working Papers 0710, University of Otago, Department of Economics, revised Jun 2007.
    12. Roberto Álvarez & Ricardo A. López, 2008. "Trade Liberalization and Industry Dynamics: A Difference in Difference Approach," Working Papers Central Bank of Chile 470, Central Bank of Chile.
    13. Andrew B. Bernard & J. Bradford Jensen & Stephen J. Redding & Peter K. Schott, 2007. "Firms in International Trade," Journal of Economic Perspectives, American Economic Association, vol. 21(3), pages 105-130, Summer.
    14. Andrew B. Bernard & Stephen J. Redding & Peter K. Schott, 2011. "Multiproduct Firms and Trade Liberalization," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 126(3), pages 1271-1318.
    15. Kristian Behrens & Giordano Mion & Yasusada Murata & Jens Südekum, 2014. "Trade, Wages, And Productivity," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 55(4), pages 1305-1348, November.
    16. Carlo Perroni & Davide Suverato, 2023. "Skills scarcity and export intensity," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 56(2), pages 719-757, May.
    17. Ricardo A. López, 2005. "Trade and Growth: Reconciling the Macroeconomic and Microeconomic Evidence," Journal of Economic Surveys, Wiley Blackwell, vol. 19(4), pages 623-648, September.
    18. Ma, Yue & Tang, Heiwai & Zhang, Yifan, 2014. "Factor Intensity, product switching, and productivity: Evidence from Chinese exporters," Journal of International Economics, Elsevier, vol. 92(2), pages 349-362.
    19. Chen, Maggie Xiaoyang & Moore, Michael O., 2010. "Location decision of heterogeneous multinational firms," Journal of International Economics, Elsevier, vol. 80(2), pages 188-199, March.
    20. Ederington, Josh & McCalman, Phillip, 2011. "Infant industry protection and industrial dynamics," Journal of International Economics, Elsevier, vol. 84(1), pages 37-47, May.
    21. Richard E. Baldwin & Rikard Forslid, 2010. "Trade Liberalization with Heterogeneous Firms," Review of Development Economics, Wiley Blackwell, vol. 14(2), pages 161-176, May.
    22. Peter Gustafsson & Paul Segerstrom, 2010. "Trade Liberalization and Productivity Growth," Review of International Economics, Wiley Blackwell, vol. 18(2), pages 207-228, May.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:inecon:v:74:y:2008:i:2:p:422-440. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/505552 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.