Testing Creative Destruction in an Opening Economy

32 Pages Posted: 6 Jul 2013

See all articles by Philippe Aghion

Philippe Aghion

College de France and London School of Economics and Political Science, Fellow; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

Johannes W. Fedderke

Pennsylvania State University - School of International Affairs

Peter Howitt

Brown University - Department of Economics; National Bureau of Economic Research (NBER)

Nicola Viegi

University of Pretoria - Department of Economics

Date Written: July 2013

Abstract

This paper analyses the relationship between trade liberalization and economic growth using a Schumpeterian framework of technological innovation and applies it to sector‐level South African data. The framework examines direct and indirect effects of trade liberalization on productivity growth. Indirect impacts operate through a differential impact of trade liberalization on firms conditional on their distance from the international technological frontier. Results confirm positive direct impacts of trade liberalization. Results confirm also that the greatest positive impact of trade liberalization will be on sectors that are close to the international technological frontier and that experienced a low level of product market competition before liberalization.

Keywords: Productivity growth, trade liberalization, South African manufacturing

Suggested Citation

Aghion, Philippe and Fedderke, Johannes W. and Howitt, Peter and Viegi, Nicola, Testing Creative Destruction in an Opening Economy (July 2013). Economics of Transition, Vol. 21, Issue 3, pp. 419-450, 2013. Available at SSRN: https://ssrn.com/abstract=2290417 or http://dx.doi.org/10.1111/ecot.12015

Philippe Aghion (Contact Author)

College de France and London School of Economics and Political Science, Fellow ( email )

London
United Kingdom

Centre for Economic Policy Research (CEPR)

London
United Kingdom

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Johannes W. Fedderke

Pennsylvania State University - School of International Affairs ( email )

Lewis Katz Building
University Park, PA 16802
United States

HOME PAGE: http://sia.psu.edu/faculty/johannes_fedderke

Peter Howitt

Brown University - Department of Economics ( email )

Box B
Providence, RI 02912
United States
401-863-2145 (Phone)
401-863-1970 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Nicola Viegi

University of Pretoria - Department of Economics ( email )

Pretoria 0002
South Africa

HOME PAGE: http://www.nviegi.net

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