Trade, Skills and Productivity

Giordano Mion and Joana Silva

No 12702, CESifo Working Paper Series from CESifo

Abstract: We examine how firms adjust production and technology in response to exogenous trade shocks. We develop a model that distinguishes revenue TFP from quantity TFP and embeds skill upgrading in technology choices. Firms respond to trade shocks by adjusting their quantity-quality trade-off and skill composition. These decisions impact firms’ quantity and revenue TFP, marginal costs, prices, and markups. Using detailed worker-firm-product data from Brazil, we show how trade shocks, instrumented by exogenous changes in exchange rates, GDP, and tariffs, affect margins. Results suggest fundamentally different firm responses to export and import changes: exports primarily induce upgrading in skills and product quality, whereas imports drive stronger efficiency and quantity-productivity gains.

Keywords: exports; imports; shocks; skill upgrading; quality; technology; quantity TFP; revenue TFP; markups (search for similar items in EconPapers)
JEL-codes: D24 F14 F61 L11 L25 (search for similar items in EconPapers)
Date: 2026
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_12702

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