IDEAS home Printed from https://ideas.repec.org/a/oup/qjecon/v119y2004i2p613-646..html
   My bibliography  Save this article

Trade and Productivity

Author

Listed:
  • Francisco Alcalá
  • Antonio Ciccone

Abstract

We find that international trade has an economically significant and statistically robust positive effect on productivity. Our trade measure is imports plus exports relative to purchasing power parity GDP (real openness), which we argue is preferable on theoretical grounds to the nominal measure conventionally used. We also find a significantly positive aggregate scale effect. Our estimates control for proxies of institutional quality as well as geography and take into account the endogeneity of trade and institutional quality. Our analysis of the channels through which trade and scale affect productivity yields that they work through total factor productivity.

Suggested Citation

  • Francisco Alcalá & Antonio Ciccone, 2004. "Trade and Productivity," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 119(2), pages 613-646.
    • Handle: RePEc:oup:qjecon:v:119:y:2004:i:2:p:613-646.
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1162/0033553041382139
    Download Restriction: Access to full text is restricted to subscribers.
    ---><---

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

    Other versions of this item:

    References listed on IDEAS

    as
    1. Dinopoulos, Elias & Thompson, Peter, 2000. "Endogenous growth in a cross-section of countries," Journal of International Economics, Elsevier, vol. 51(2), pages 335-362, August.
    2. Robert E. Hall & Charles I. Jones, 1999. "Why do Some Countries Produce So Much More Output Per Worker than Others?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 114(1), pages 83-116.
    3. Pesaran, M Hashem & Smith, Richard J, 1994. "A Generalized R[superscript]2 Criterion for Regression Models Estimated by the Instrumental Variables Method," Econometrica, Econometric Society, vol. 62(3), pages 705-710, May.
    4. Daron Acemoglu & Simon Johnson & James A. Robinson, 2001. "The Colonial Origins of Comparative Development: An Empirical Investigation," American Economic Review, American Economic Association, vol. 91(5), pages 1369-1401, December.
    5. Kenneth Rogoff, 1996. "The Purchasing Power Parity Puzzle," Journal of Economic Literature, American Economic Association, vol. 34(2), pages 647-668, June.
    6. Dani Rodrik & Arvind Subramanian & Francesco Trebbi, 2004. "Institutions Rule: The Primacy of Institutions Over Geography and Integration in Economic Development," Journal of Economic Growth, Springer, vol. 9(2), pages 131-165, June.
    7. Mikael Lindahl & Alan B. Krueger, 2001. "Education for Growth: Why and for Whom?," Journal of Economic Literature, American Economic Association, vol. 39(4), pages 1101-1136, December.
    8. Irwin, Douglas A. & Tervio, Marko, 2002. "Does trade raise income?: Evidence from the twentieth century," Journal of International Economics, Elsevier, vol. 58(1), pages 1-18, October.
    9. Enrico Spolaore & Alberto Alesina & Romain Wacziarg, 2000. "Economic Integration and Political Disintegration," American Economic Review, American Economic Association, vol. 90(5), pages 1276-1296, December.
    10. Bettina H. Aten, 1997. "Does Space Matter? International Comparisons of the Prices of Tradables and Nontradables," International Regional Science Review, , vol. 20(1-2), pages 35-52, April.
    11. James E. Rauch & Diana Weinhold, 1999. "Openness, Specialization, and Productivity Growth in Less Developed Countries," Canadian Journal of Economics, Canadian Economics Association, vol. 32(4), pages 1009-1027, August.
    12. Alberto F. Ades & Edward L. Glaeser, 1999. "Evidence on Growth, Increasing Returns, and the Extent of the Market," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 114(3), pages 1025-1045.
    13. Kornai, Janos, 1992. "The Socialist System: The Political Economy of Communism," OUP Catalogue, Oxford University Press, number 9780198287766.
    14. Coe, David T. & Helpman, Elhanan, 1995. "International R&D spillovers," European Economic Review, Elsevier, vol. 39(5), pages 859-887, May.
    15. Francisco Rodríguez & Dani Rodrik, 2001. "Trade Policy and Economic Growth: A Skeptic's Guide to the Cross-National Evidence," NBER Chapters, in: NBER Macroeconomics Annual 2000, Volume 15, pages 261-338, National Bureau of Economic Research, Inc.
    16. Miller, Stephen M. & Upadhyay, Mukti P., 2000. "The effects of openness, trade orientation, and human capital on total factor productivity," Journal of Development Economics, Elsevier, vol. 63(2), pages 399-423, December.
    17. Mr. Arvind Subramanian & Mr. Francesco Trebbi & Mr. Dani Rodrik, 2002. "Institutions Rule: The Primacy of Institutions over Integration and Geography in Economic Development," IMF Working Papers 2002/189, International Monetary Fund.
    18. Barro, Robert J. & Lee, Jong-Wha, 1993. "International comparisons of educational attainment," Journal of Monetary Economics, Elsevier, vol. 32(3), pages 363-394, December.
    19. Stephen Knack & Philip Keefer, 1995. "Institutions And Economic Performance: Cross‐Country Tests Using Alternative Institutional Measures," Economics and Politics, Wiley Blackwell, vol. 7(3), pages 207-227, November.
    20. David H. Romer & Jeffrey A. Frankel, 1999. "Does Trade Cause Growth?," American Economic Review, American Economic Association, vol. 89(3), pages 379-399, June.
    21. N. Gregory Mankiw & David Romer & David N. Weil, 1992. "A Contribution to the Empirics of Economic Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 107(2), pages 407-437.
    22. Gustavsson, Patrik & Hansson, Par & Lundberg, Lars, 1999. "Technology, resource endowments and international competitiveness," European Economic Review, Elsevier, vol. 43(8), pages 1501-1530, August.
    23. Barro, Robert J & Lee, Jong-Wha, 2001. "International Data on Educational Attainment: Updates and Implications," Oxford Economic Papers, Oxford University Press, vol. 53(3), pages 541-563, July.
    24. Jeffrey Frankel & Andrew Rose, 2002. "An Estimate of the Effect of Common Currencies on Trade and Income," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 117(2), pages 437-466.
    25. Marcelo J. Moreira, 2003. "A Conditional Likelihood Ratio Test for Structural Models," Econometrica, Econometric Society, vol. 71(4), pages 1027-1048, July.
    26. David, Paul A., 1977. "Invention and accumulation in america's economic growth: A nineteenth-century parable," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 6(1), pages 179-228, January.
    27. Douglas Staiger & James H. Stock, 1997. "Instrumental Variables Regression with Weak Instruments," Econometrica, Econometric Society, vol. 65(3), pages 557-586, May.
    28. Helpman, Elhanan, 1981. "International trade in the presence of product differentiation, economies of scale and monopolistic competition : A Chamberlin-Heckscher-Ohlin approach," Journal of International Economics, Elsevier, vol. 11(3), pages 305-340, August.
    29. repec:bla:revinw:v:42:y:1996:i:3:p:257-69 is not listed on IDEAS
    30. Jeffrey A. Frankel & Andrew K. Rose, 2000. "Estimating the Effect of Currency Unions on Trade and Output," NBER Working Papers 7857, National Bureau of Economic Research, Inc.
    31. Stock, James H & Wright, Jonathan H & Yogo, Motohiro, 2002. "A Survey of Weak Instruments and Weak Identification in Generalized Method of Moments," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(4), pages 518-529, October.
    32. Peter J. Klenow & Andrés Rodríguez-Clare, 1997. "The Neoclassical Revival in Growth Economics: Has It Gone Too Far?," NBER Chapters, in: NBER Macroeconomics Annual 1997, Volume 12, pages 73-114, National Bureau of Economic Research, Inc.
    33. Peter J. Klenow & Mark Bils, 2000. "Does Schooling Cause Growth?," American Economic Review, American Economic Association, vol. 90(5), pages 1160-1183, December.
    34. Krugman, Paul R, 1981. "Intraindustry Specialization and the Gains from Trade," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 959-973, October.
    35. Heston, Alan & Nuxoll, Daniel A & Summers, Robert, 1994. "The Differential-Productivity Hypothesis and Purchasing-Power Parties: Some New Evidence," Review of International Economics, Wiley Blackwell, vol. 2(3), pages 227-243, October.
    36. Kaufmann, Daniel & Kraay, Aart & Zoido-Lobaton, Pablo, 1999. "Aggregating governance indicators," Policy Research Working Paper Series 2195, The World Bank.
    37. Jeffrey D. Sachs & Andrew Warner, 1995. "Economic Reform and the Process of Global Integration," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 26(1, 25th A), pages 1-118.
    38. Ethier, Wilfred J, 1982. "National and International Returns to Scale in the Modern Theory of International Trade," American Economic Review, American Economic Association, vol. 72(3), pages 389-405, June.
    39. repec:umd:umdeco:rodriguez9901 is not listed on IDEAS
    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. Capolupo, Rosa, 2009. "The New Growth Theories and Their Empirics after Twenty Years," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 3, pages 1-72.
    2. Francisco Alcalá & Antonio Ciccone, 2003. "Trade, extent of the market and economic growth 1960-1996," Economics Working Papers 765, Department of Economics and Business, Universitat Pompeu Fabra, revised Dec 2003.
    3. Gabriel Felbermayr, 2004. "Does trade cause divergence? Dynamic panel data evidence," Economics working papers 2004-07, Department of Economics, Johannes Kepler University Linz, Austria.
    4. Badinger, Harald, 2008. "Trade policy and productivity," European Economic Review, Elsevier, vol. 52(5), pages 867-891, July.
    5. Kogel, Tomas, 2005. "Youth dependency and total factor productivity," Journal of Development Economics, Elsevier, vol. 76(1), pages 147-173, February.
    6. Chen, Derek H. C. & Dahlman, Carl J., 2004. "Knowledge and development : a cross-section approach," Policy Research Working Paper Series 3366, The World Bank.
    7. Stimpfle, Alexander & Stadelmann, David, 2015. "The Impact of Fundamental Development Factors on Different Income Groups: International Evidence," VfS Annual Conference 2015 (Muenster): Economic Development - Theory and Policy 113128, Verein für Socialpolitik / German Economic Association.
    8. Eric A. Hanushek & Ludger Woessmann, 2008. "The Role of Cognitive Skills in Economic Development," Journal of Economic Literature, American Economic Association, vol. 46(3), pages 607-668, September.
    9. Areendam Chanda & Carl‐Johan Dalgaard, 2008. "Dual Economies and International Total Factor Productivity Differences: Channelling the Impact from Institutions, Trade, and Geography," Economica, London School of Economics and Political Science, vol. 75(300), pages 629-661, November.
    10. Arjan Lejour & Vladimir Solanic & Paul Tang, 2009. "EU Accession and Income Growth: An Empirical Approach," Transition Studies Review, Springer;Central Eastern European University Network (CEEUN), vol. 16(1), pages 127-144, May.
    11. Jeffrey A. Frankel & Shang-Jin Wei, 2004. "Managing Macroeconomic Crises," NBER Working Papers 10907, National Bureau of Economic Research, Inc.
    12. Eric Hanushek & Ludger Woessmann, 2012. "Do better schools lead to more growth? Cognitive skills, economic outcomes, and causation," Journal of Economic Growth, Springer, vol. 17(4), pages 267-321, December.
    13. Noguer, Marta & Siscart, Marc, 2005. "Trade raises income: a precise and robust result," Journal of International Economics, Elsevier, vol. 65(2), pages 447-460, March.
    14. Sambit Bhattacharyya & Steve Dowrick & Jane Golley, 2009. "Institutions and Trade: Competitors or Complements in Economic Development?," The Economic Record, The Economic Society of Australia, vol. 85(270), pages 318-330, September.
    15. Aribah Aslam, 2020. "The hotly debate of human capital and economic growth: why institutions may matter?," Quality & Quantity: International Journal of Methodology, Springer, vol. 54(4), pages 1351-1362, August.
    16. Ulaşan, Bülent, 2012. "Cross-country growth empirics and model uncertainty: An overview," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 6, pages 1-69.
    17. Francis Teal & Måns Söderbom, 2003. "Openness and Human Capital as Sources of Productivity Growth: An Empirical Investigation," Economics Series Working Papers WPS/2003-06, University of Oxford, Department of Economics.
    18. Jasmin Katrin Gröschl, 2013. "Gravity Model Applications and Macroeconomic Perspectives," ifo Beiträge zur Wirtschaftsforschung, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 48.
    19. Vieira, Flávio & MacDonald, Ronald & Damasceno, Aderbal, 2012. "The role of institutions in cross-section income and panel data growth models: A deeper investigation on the weakness and proliferation of instruments," Journal of Comparative Economics, Elsevier, vol. 40(1), pages 127-140.
    20. Ahmet Faruk AYSAN & Mustapha Kamel NABLI & Marie‐Ange VÉGANZONÈS‐VAROUDAKIS, 2007. "Governance Institutions And Private Investment: An Application To The Middle East And North Africa," The Developing Economies, Institute of Developing Economies, vol. 45(3), pages 339-377, September.

    More about this item

    JEL classification:

    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

    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:oup:qjecon:v:119:y:2004:i:2:p:613-646.. 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: Oxford University Press (email available below). General contact details of provider: https://academic.oup.com/qje .

    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.