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Does Trade Liberalization Increase Average Plant Productivity?

Author

Listed:
  • Timothy Kehoe

    (University of Minnesota)

  • Pau Pujolas

    (McMaster University)

  • Wyatt Brooks

    (University of Notre Dame)

Abstract

In the standard heterogeneous firm model of Hopenhayn (1992) and Melitz (2003), more efficient firms export and trade liberalization leads to higher average efficiency among firms. In data for Columbian plants 1981–1991, we see that the average level of productivity among exporters is higher than that among non exporters and that trade liberalization led to an increase in average firm productivity. Are there facts in the data explained by the Hopenhayn-Meltiz model? The measure of product in the data differs from the measure of efficiency in the model. In fact, in a calibrated version of the Hopenhayn-Meltiz model, the average level of productivity among exporters is lower than that among non exporters and trade liberalization leads to an increase in average firm productivity. The impact of trade liberalization on productivity is a puzzle for the standard model.

Suggested Citation

  • Timothy Kehoe & Pau Pujolas & Wyatt Brooks, 2014. "Does Trade Liberalization Increase Average Plant Productivity?," 2014 Meeting Papers 578, Society for Economic Dynamics.
    • Handle: RePEc:red:sed014:578
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