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Technology adoption and the selection effect of trade

Davide Sala () and Antonio Navas ()

UC3M Working papers. Economics from Universidad Carlos III de Madrid. Departamento de Economía

Abstract: The reallocation of output across plants and the productivity growth at individual plants are both important sources of productivity growth at the industry level. Recent evidence has shown that trade liberalization is related to both effects. While a trade model with firm heterogeneity can account for the first effect, it can not explain the second effect. We add to this model the option for firms to costly adopt more productive technologies and show that plant productivity actually rises in response to lower trade costs. Following trade liberalization, selection into exporting raises the market share only for some exporters. Therefore, a greater scale of operation amplifies their return from costly productivity-enhancement investments and leads a greater proportion of them to implement a more innovative technology.

Keywords: International; trade; Technology; adoption; Productivity (search for similar items in EconPapers)
JEL-codes: F12 F15 L11 O33 (search for similar items in EconPapers)
Date: 2007-08
New Economics Papers: this item is included in nep-dev and nep-int
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (26)

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