Trade, Productivity and (Mis)allocation

60 Pages Posted: 24 Jan 2020

See all articles by Antoine Berthou

Antoine Berthou

Banque de France

John Jong-Hyun Chung

Auburn University

Kalina Manova

University College London - Department of Economics

Charlotte Sandoz Dit Bragard

International Monetary Fund (IMF)

Multiple version iconThere are 3 versions of this paper

Date Written: January 1, 2020

Abstract

We examine the gains from globalization in the presence of firm heterogeneity and potential resource misallocation. We show theoretically that without distortions, bilateral and export liberalizations increase aggregate welfare and productivity, while import liberalization has ambiguous effects. Resource misallocation can either amplify, dampen or reverse the gains from trade. Using model-consistent measures and unique new data on 14 European countries and 20 industries in 1998-2011, we empirically establish that exogenous shocks to export demand and import competition both generate large aggregate productivity gains. Guided by theory, we provide evidence consistent with these effects operating through reallocations across firms in the presence of distortions. (i) Both export and import expansion increase average firm productivity, but the former also shifts activity towards more productive firms, while the latter acts in reverse. (ii) Both export and import exposure raise the productivity threshold for survival, but this cut-off is not a sufficient statistic for aggregate productivity. (iii) Efficient institutions, factor and product markets amplify the gains from import competition but dampen those from export access.

Keywords: International Trade, Productivity, Allocative Efficiency

JEL Classification: F10, F14, F43

Suggested Citation

Berthou, Antoine and Chung, John Jong-Hyun and Manova, Kalina B. and Sandoz Dit Bragard, Charlotte, Trade, Productivity and (Mis)allocation (January 1, 2020). Available at SSRN: https://ssrn.com/abstract=3523625 or http://dx.doi.org/10.2139/ssrn.3523625

Antoine Berthou (Contact Author)

Banque de France ( email )

Paris
France

John Jong-Hyun Chung

Auburn University ( email )

415 West Magnolia Avenue
Auburn, AL 36849
United States

Kalina B. Manova

University College London - Department of Economics ( email )

Drayton House, 30 Gordon Street
30 Gordon Street
London, WC1H 0AX
United Kingdom

Charlotte Sandoz Dit Bragard

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

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