Innovation, Firm Dynamics, and International Trade

Federal Reserve Bank of Minneapolis Staff Report No. 444

Posted: 11 May 2010

See all articles by Andrew Atkeson

Andrew Atkeson

University of California, Los Angeles (UCLA) - Department of Economics; National Bureau of Economic Research (NBER)

Ariel T. Burstein

University of California, Los Angeles (UCLA) - Department of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: May 6, 2010

Abstract

We present a general equilibrium model of the response of firms' decisions to operate, innovate, and engage in international trade to a change in the marginal cost of international trade. We find that, although a change in trade costs can have a substantial impact on heterogeneous firms' exit, export, and process innovation decisions, the impact of changes in these decisions on welfare is largely offset by the response of product innovation. Our results suggest that microeconomic evidence on firms' responses to changes in international trade costs may not be informative about the implications of changes in these trade costs for aggregate welfare.

Keywords: innovation, firm dynamics, international trade

JEL Classification: F4, F43, F12, L11

Suggested Citation

Atkeson, Andrew G. and Burstein, Ariel T., Innovation, Firm Dynamics, and International Trade (May 6, 2010). Federal Reserve Bank of Minneapolis Staff Report No. 444, Available at SSRN: https://ssrn.com/abstract=1601497

Andrew G. Atkeson (Contact Author)

University of California, Los Angeles (UCLA) - Department of Economics ( email )

Box 951477
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National Bureau of Economic Research (NBER) ( email )

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Ariel T. Burstein

University of California, Los Angeles (UCLA) - Department of Economics ( email )

Box 951477
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Los Angeles, CA 90095-1477
United States
310-206-6732 (Phone)
310-825-9528 (Fax)

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