Trade Liberalization and Heterogeneous Technology Investments

44 Pages Posted: 28 Aug 2015

See all articles by Maria Bas

Maria Bas

Centre d'Etudes Prospectives et d'Info. Internationales (CEPII)

Ivan Ledezma

Pse-Ens

Date Written: September 2015

Abstract

We propose a trade model where heterogeneous firms decide on a productivity‐enhancing technology investment. The model analyzes the impact of multilateral trade liberalization on firm‐ and industry‐level productivity. Freer trade increases the incentives to invest in technology by raising export profits. It also dampens these incentives, however, as profits stemming from domestic sales are reduced. Only exporters benefit from the former positive effect. The shape of the distribution of efficiency draws, the level of trade costs and the technology intensity of the industry are key elements removing the ambiguities regarding the net impact of trade liberalization.

Suggested Citation

Bas, Maria and Ledezma, Ivan, Trade Liberalization and Heterogeneous Technology Investments (September 2015). Review of International Economics, Vol. 23, Issue 4, pp. 738-781, 2015, Available at SSRN: https://ssrn.com/abstract=2652503 or http://dx.doi.org/10.1111/roie.12189

Maria Bas (Contact Author)

Centre d'Etudes Prospectives et d'Info. Internationales (CEPII) ( email )

9 rue Georges Pitard
Paris Cedex 15, F-75015
France

Ivan Ledezma

Pse-Ens ( email )

48 bd Jourdan
Paris, 75014
France

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