Equilibrium Technology Diffusion, Trade, and Growth

85 Pages Posted: 27 Jan 2015 Last revised: 7 Mar 2015

See all articles by Jesse Perla

Jesse Perla

University of British Columbia (UBC)

Christopher Tonetti

New York University (NYU)

Michael E. Waugh

New York University (NYU), Leonard N. Stern School of Business, Department of Economics

Date Written: January 2015

Abstract

We study how opening to trade affects economic growth in a model where heterogeneous firms can adopt new technologies already in use by other firms in their home country. We characterize the growth rate using a summary statistic of the profit distribution—the mean-min ratio. Opening to trade increases the profit spread through increased export opportunities and foreign competition, induces more rapid technology adoption, and generates faster growth. Faster growth comes with costs: labor is reallocated away from production and fewer varieties are produced domestically. Quantitatively, these forces balance to produce large consumption-equivalent welfare gains from trade—especially along the transition path.

Suggested Citation

Perla, Jesse and Tonetti, Christopher and Waugh, Michael E., Equilibrium Technology Diffusion, Trade, and Growth (January 2015). NBER Working Paper No. w20881. Available at SSRN: https://ssrn.com/abstract=2555401

Jesse Perla (Contact Author)

University of British Columbia (UBC) ( email )

2329 West Mall
Vancouver, British Columbia BC V6T 1Z4
Canada

HOME PAGE: http://www.jesseperla.com

Christopher Tonetti

New York University (NYU) ( email )

Bobst Library, E-resource Acquisitions
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New York, NY 10003-711
United States

HOME PAGE: http://www.christophertonetti.com/

Michael E. Waugh

New York University (NYU), Leonard N. Stern School of Business, Department of Economics ( email )

269 Mercer Street
New York, NY 10003
United States

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