Gains from trade and measured total factor productivity

Pedro Cavalcanti Ferreira and Alberto Trejos

No 711, FGV EPGE Economics Working Papers (Ensaios Economicos da EPGE) from EPGE Brazilian School of Economics and Finance - FGV EPGE (Brazil)

Abstract: We develop and calibrate a model where diferences in factor en-dowments lead countries to trade di¤erent goods, so that the existence of international trade changes the sectorial composition of output from one country to another. Gains from trade re ect in total factor productivity. We perform a development decomposition, to assess the impact of trade and barriers to trade on measured TFP. In our sample, the median size of that e¤ect is about 6.5% of output, with a median of 17% and a maximum of 89%. Also, the model predicts that changes in the terms of trade cause a change of productivity, and that efect has an average elasticity of 0.71.

Date: 2010-05-31
New Economics Papers: this item is included in nep-eff, nep-int and nep-opm
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Persistent link: https://EconPapers.repec.org/RePEc:fgv:epgewp:711

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