Trade and Growth with Heterogeneous Firms

Richard Baldwin and Frédéric Robert-Nicoud

CEP Discussion Papers from Centre for Economic Performance, LSE

Abstract: This paper explores the impact of trade on growth when firms are heterogeneous. We findthat greater openness produces anti-and pro-growth effects. The Melitz-model selectioneffects raises the expected cost of introducing a new variety and this tends to slow the rate ofnew-variety introduction and hence growth. The pro-growth effect stems from the impact thatfreer trade has on the marginal cost of innovating. The balance of the two effects isambiguous with the sign depending upon the exact nature of the innovation technology andits connection to international trade in goods and ideas. We consider five special cases (theseinclude the Grossman-Helpman, the Coe- Helpman and Rivera-Batiz-Romer models) two ofwhich suggest that trade harms growth; the others predicting the opposite.

Keywords: trade and endogenous growth; heterogeneous firms; dynamic versus staticefficiency (search for similar items in EconPapers)
JEL-codes: H32 P16 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-int and nep-pbe
Date: 2006-06
View list of references View citations in EconPapers

Downloads: (external link)
http://cep.lse.ac.uk/pubs/download/dp0727.pdf (application/pdf)

Related works:
Working Paper: Trade and Growth with Heterogenous Firms (2006)
Working Paper: Trade and Growth with Heterogeneous Firms (2005)
Working Paper: Trade and Growth with Heterogenous Firms (2006)
Journal Article: Trade and growth with heterogeneous firms (2008)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:cep:cepdps:dp0727

Access Statistics for this paper

More papers in CEP Discussion Papers from Centre for Economic Performance, LSE
Series data maintained by ().