Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/121128
Authors: 
Sampson, Thomas
Year of Publication: 
2013
Series/Report no.: 
FIW Working Paper 122
Abstract: 
This paper develops an open economy growth model in which firm heterogeneity increases the gains from trade. Technology spillovers from incumbent firms to entrants cause the productivity threshold for firm survival to grow over time as competition becomes tougher. By raising the profits of exporters, trade increases the entry rate and generates a dynamic selection effect that leads to higher growth. The paper shows that the gains from trade can be decomposed into: static gains that equal the total gains from trade in an economy without technology spillovers, and; dynamic gains that are strictly positive. Since trade raises growth through selection, not scale effects, the positive growth effect of trade vanishes when firms are homogeneous. Thus, firm heterogeneity creates a new source of dynamic gains from trade. Calibrating the model to the U.S. economy implies that dynamic selection approximately triples the gains from trade.
Subjects: 
Gains from Trade
Endogenous Growth
Firm Heterogeneity
JEL: 
F12
F43
O41
Document Type: 
Working Paper

Files in This Item:
File
Size
595.54 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.