Ricardian selection

Andrea Finicelli, Patrizio Pagano () and Massimo Sbracia

Journal of International Economics, 2013, vol. 89, issue 1, 96-109

Abstract: We analyze the foundations of the relationship between trade and average productivity in the Ricardian model. Under broad assumptions about the autarky distributions of industry productivities, trade openness raises average productivity. This is due to the selection effect of international competition – driven by comparative advantage – which makes “some” high- and “many” low-productivity industries exit the market. We derive a model-based measure of this effect that requires only production and trade data. For a sample of 41 countries, we find that Ricardian selection raised average productivity in the manufacturing sector by 11% above the autarky level in 2005 (6% in 1985), with a neat positive time trend and large cross-country differences.

Keywords: Eaton–Kortum model; Selection effect; International competition (search for similar items in EconPapers)
JEL-codes: D24 F10 O40 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (51)

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Related works:
Working Paper: Ricardian selection (2009)
Working Paper: Ricardian selection (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:inecon:v:89:y:2013:i:1:p:96-109

DOI: 10.1016/j.jinteco.2012.04.005

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