IDEAS home Printed from https://ideas.repec.org/p/cep/cepdps/dp2009.html
   My bibliography  Save this paper

Trade, skills and productivity

Author

Listed:
  • Giordano Mion
  • Joana Silva

Abstract

We examine how firms adjust their production and technology in response to exogenous trade shocks. We develop a model in which revenue TFP can be distinguished from quantity TFP, and where skill upgrading is explicitly embedded into the firm's technology choice. Within our framework, firms respond to export and import shocks by adjusting their trade-off between quantity and quality, as well as the skill composition of their workforce. Ultimately, these decisions impact firms' quantity and revenue TFP, marginal costs, prices, and markups. We quantify the model using detailed firm and product data from Brazil and show how export and import shocks, instrumented using exogenous changes in exchange rates, GDP, and tariffs, affect a wide array of firm margins. Our results indicate both skill and quality upgrading in response to export shocks, while import shocks foster technology upgrading and productivity improvements.

Suggested Citation

  • Giordano Mion & Joana Silva, 2024. "Trade, skills and productivity," CEP Discussion Papers dp2009, Centre for Economic Performance, LSE.
    • Handle: RePEc:cep:cepdps:dp2009
    as

    Download full text from publisher

    File URL: https://cep.lse.ac.uk/pubs/download/dp2009.pdf
    Download Restriction: no
    ---><---

    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. Jan De Loecker & Pinelopi K. Goldberg & Amit K. Khandelwal & Nina Pavcnik, 2016. "Prices, Markups, and Trade Reform," Econometrica, Econometric Society, vol. 84, pages 445-510, March.
    3. Fernandes, Ana M., 2007. "Trade policy, trade volumes and plant-level productivity in Colombian manufacturing industries," Journal of International Economics, Elsevier, vol. 71(1), pages 52-71, March.
    4. Kalina Manova & Zhiwei Zhang, 2012. "Export Prices Across Firms and Destinations," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 127(1), pages 379-436.
    5. 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.
    6. Banu Demir & Ana Cecília Fieler & Daniel Yi Xu & Kelly Kaili Yang, 2024. "O-Ring Production Networks," Journal of Political Economy, University of Chicago Press, vol. 132(1), pages 200-247.
    7. Emanuele Forlani & Ralf Martin & Giordano Mion & Mirabelle Muûls, 2023. "Unraveling Firms: Demand, Productivity and Markups Heterogeneity," The Economic Journal, Royal Economic Society, vol. 133(654), pages 2251-2302.
    8. Mary Amiti & Jozef Konings, 2007. "Trade Liberalization, Intermediate Inputs, and Productivity: Evidence from Indonesia," American Economic Review, American Economic Association, vol. 97(5), pages 1611-1638, December.
    9. Hallak, Juan Carlos, 2006. "Product quality and the direction of trade," Journal of International Economics, Elsevier, vol. 68(1), pages 238-265, January.
    10. Irene Brambilla & Daniel Lederman & Guido Porto, 2012. "Exports, Export Destinations, and Skills," American Economic Review, American Economic Association, vol. 102(7), pages 3406-3438, December.
    11. Wood, Adrian, 1998. "Globalisation and the Rise in Labour Market Inequalities," Economic Journal, Royal Economic Society, vol. 108(450), pages 1463-1482, September.
    12. Nicolas Berman & Philippe Martin & Thierry Mayer, 2012. "How do Different Exporters React to Exchange Rate Changes?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 127(1), pages 437-492.
    13. Jan De Loecker & Frederic Warzynski, 2012. "Markups and Firm-Level Export Status," American Economic Review, American Economic Association, vol. 102(6), pages 2437-2471, October.
    14. Eric A. Verhoogen, 2008. "Trade, Quality Upgrading, and Wage Inequality in the Mexican Manufacturing Sector," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 123(2), pages 489-530.
    15. 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.
    16. Daniel A. Ackerberg & Kevin Caves & Garth Frazer, 2015. "Identification Properties of Recent Production Function Estimators," Econometrica, Econometric Society, vol. 83, pages 2411-2451, November.
    17. Albert Park & Dean Yang & Xinzheng Shi & Yuan Jiang, 2010. "Exporting and Firm Performance: Chinese Exporters and the Asian Financial Crisis," The Review of Economics and Statistics, MIT Press, vol. 92(4), pages 822-842, November.
    18. Pinelopi K. Goldberg (ed.), 2015. "Trade and Inequality," Books, Edward Elgar Publishing, number 15997.
    19. De Loecker, Jan, 2007. "Do exports generate higher productivity? Evidence from Slovenia," Journal of International Economics, Elsevier, vol. 73(1), pages 69-98, September.
    20. Paula Bustos, 2011. "Trade Liberalization, Exports, and Technology Upgrading: Evidence on the Impact of MERCOSUR on Argentinian Firms," American Economic Review, American Economic Association, vol. 101(1), pages 304-340, February.
    21. Mary Amiti & Oleg Itskhoki & Jozef Konings, 2014. "Importers, Exporters, and Exchange Rate Disconnect," American Economic Review, American Economic Association, vol. 104(7), pages 1942-1978, July.
    22. Ann Harrison & John McLaren & Margaret McMillan, 2011. "Recent Perspectives on Trade and Inequality," Annual Review of Economics, Annual Reviews, vol. 3(1), pages 261-289, September.
    23. 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.
    24. Nina Pavcnik, 2017. "The Impact of Trade on Inequality in Developing Countries," NBER Working Papers 23878, National Bureau of Economic Research, Inc.
    25. Mion, Giordano & Zhu, Linke, 2013. "Import competition from and offshoring to China: A curse or blessing for firms?," Journal of International Economics, Elsevier, vol. 89(1), pages 202-215.
    26. Pinelopi Koujianou Goldberg & Nina Pavcnik, 2007. "Distributional Effects of Globalization in Developing Countries," Journal of Economic Literature, American Economic Association, vol. 45(1), pages 39-82, March.
    27. Paulo Bastos & Joana Silva & Eric Verhoogen, 2018. "Export Destinations and Input Prices," American Economic Review, American Economic Association, vol. 108(2), pages 353-392, February.
    28. Petia Topalova & Amit Khandelwal, 2011. "Trade Liberalization and Firm Productivity: The Case of India," The Review of Economics and Statistics, MIT Press, vol. 93(3), pages 995-1009, August.
    29. Wooldridge, Jeffrey M., 2009. "On estimating firm-level production functions using proxy variables to control for unobservables," Economics Letters, Elsevier, vol. 104(3), pages 112-114, September.
    30. Ana L. Revenga, 1992. "Exporting Jobs?The Impact of Import Competition on Employment and Wages in U. S. Manufacturing," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 107(1), pages 255-284.
    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. Fieler, Ana Cecília & Harrison, Ann E., 2023. "Escaping import competition in China," Journal of International Economics, Elsevier, vol. 145(C).
    2. Alvaro Garcia-Marin & Nico Voigtländer, 2019. "Exporting and Plant-Level Efficiency Gains: It's in the Measure," Journal of Political Economy, University of Chicago Press, vol. 127(4), pages 1777-1825.
    3. Feicheng Wang & Chris Milner & Juliane Scheffel, 2022. "Export destination and the skill premium: Evidence from Chinese manufacturing industries," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 55(2), pages 1057-1094, May.
    4. Irene Brambilla & Nicolas Depetris Chauvin & Guido Porto, 2015. "Wage and Employment Gains from Exports: Evidence from Developing Countries," Working Papers 2015-28, CEPII research center.
    5. Irene Brambilla & Nicolas Depetris Chauvin & Guido Porto, 2017. "Examining the Export Wage Premium in Developing Countries," Review of International Economics, Wiley Blackwell, vol. 25(3), pages 447-475, August.
    6. Jamil, Nida & Chaudhry, Theresa Thompson & Chaudhry, Azam, 2022. "Trading textiles along the new silk route: The impact on Pakistani firms of gaining market access to China," Journal of Development Economics, Elsevier, vol. 158(C).
    7. Adriana Peluffo, 2021. "The Impact of Export Destination on Skills in a Middle-Income Country," Global Journal of Emerging Market Economies, Emerging Markets Forum, vol. 13(3), pages 317-340, September.
    8. Pavcnik, Nina & Goldberg, Pinelopi, 2016. "The Effects of Trade Policy," CEPR Discussion Papers 11104, C.E.P.R. Discussion Papers.
    9. Bas, Maria & Strauss-Kahn, Vanessa, 2015. "Input-trade liberalization, export prices and quality upgrading," Journal of International Economics, Elsevier, vol. 95(2), pages 250-262.
    10. 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.
    11. Jingfang Zhang & Emir Malikov, 2023. "Detecting Learning by Exporting and from Exporters," Journal of Productivity Analysis, Springer, vol. 60(1), pages 1-19, August.
    12. repec:spo:wpmain:info:hdl:2441/6ggbvnr6munghes9oc1hggs11 is not listed on IDEAS
    13. Crinò, Rosario & Bonfiglioli, Alessandra & Gancia, Gino, 2021. "International Trade with Heterogeneous Firms: Theory and Evidence," CEPR Discussion Papers 16249, C.E.P.R. Discussion Papers.
    14. Xavier Cirera & Daniel Lederman & Juan A. Máñez Castillejo & María E. Rochina Barrachina & Juan A. Sanchis-Llopis, 2021. "Firm productivity gains in a period of slow trade liberalization: evidence from Brazil," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 38(1), pages 57-87, April.
    15. Bas, Maria & Paunov, Caroline, 2021. "Disentangling trade reform impacts on firm market and production decisions," European Economic Review, Elsevier, vol. 135(C).
    16. Irene Brambilla & Daniel Lederman & Guido Porto, 2019. "Exporting firms and the demand for skilled tasks," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 52(2), pages 763-783, May.
    17. Nico Voigtlaender & Diego Saravia, 2013. "Imported Inputs, Quality Complementarity, and Skill Demand," 2013 Meeting Papers 699, Society for Economic Dynamics.
    18. Pian Shu & Claudia Steinwender, 2019. "The Impact of Trade Liberalization on Firm Productivity and Innovation," Innovation Policy and the Economy, University of Chicago Press, vol. 19(1), pages 39-68.
    19. repec:spo:wpecon:info:hdl:2441/6ggbvnr6munghes9oc1hggs11 is not listed on IDEAS
    20. repec:hal:wpspec:info:hdl:2441/6ggbvnr6munghes9oc1hggs11 is not listed on IDEAS
    21. repec:hal:spmain:info:hdl:2441/6ggbvnr6munghes9oc1hggs11 is not listed on IDEAS
    22. Andrew B. Bernard & J. Bradford Jensen & Stephen J. Redding & Peter K. Schott, 2018. "Global Firms," Journal of Economic Literature, American Economic Association, vol. 56(2), pages 565-619, June.
    23. Giordano, Claire & Lopez-Garcia, Paloma, 2019. "Firm heterogeneity and trade in EU countries: a cross-country analysis," Occasional Paper Series 225, European Central Bank.
    24. Brambilla, Irene & Porto, Guido G., 2016. "High-income export destinations, quality and wages," Journal of International Economics, Elsevier, vol. 98(C), pages 21-35.

    More about this item

    Keywords

    exports; imports; shocks; skill upgrading; quality; technology; quantity TFP; revenue TFP; markups;
    All these keywords.

    NEP fields

    This paper has been announced in the following NEP Reports:

    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:cep:cepdps:dp2009. 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: the person in charge (email available below). General contact details of provider: https://cep.lse.ac.uk/_new/publications/discussion-papers/ .

    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.