Trade and Growth with Heterogeneous Firms

38 Pages Posted: 27 Jul 2005

See all articles by Richard E. Baldwin

Richard E. Baldwin

University of Geneva - Graduate Institute of International Studies (HEI); Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

Frederic Robert-Nicoud

University of Geneva - Department of Political Economics; Centre for Economic Policy Research (CEPR)

Date Written: March 2005

Abstract

This paper explores the impact of trade on growth when firms are heterogeneous. Our findings can be viewed as relevant to the trade and growth literature on one hand and the heterogeneous-firms trade theory on the other. Our main finding - that freer trade is both anti-growth and welfare worsening from a purely dynamic perspective - contrasts with most findings in the endogenous growth literature. We also show that market-entry costs are anti-growth, but heterogeneity per se is pro-growth. As concerns the heterogeneous-firms literature our main finding is a static-vs.-dynamic trade-off in terms of productivity gains. Freer trade raises measured productivity in a level sense but slows measured productivity growth.

Keywords: Trade and endogenous growth, heterogeneous firms, dynamic versus static efficiency

JEL Classification: H32, P16

Suggested Citation

Baldwin, Richard E. and Robert-Nicoud, Frederic L., Trade and Growth with Heterogeneous Firms (March 2005). CEPR Discussion Paper No. 4965, Available at SSRN: https://ssrn.com/abstract=771487

Richard E. Baldwin (Contact Author)

University of Geneva - Graduate Institute of International Studies (HEI) ( email )

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HOME PAGE: http://www.hei.unige.ch/~baldwin/

Centre for Economic Policy Research (CEPR)

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National Bureau of Economic Research (NBER)

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Frederic L. Robert-Nicoud

University of Geneva - Department of Political Economics ( email )

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Switzerland
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+41 22 379 8293 (Fax)

HOME PAGE: http://www.unige.ch/ses/ecopo/staff/robert/home.html

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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