Impact of Trade on Industry-Level Output

Arjad Abbas Khosa, Yoshinori Kurokawa and Zhengfei Yu

Tsukuba Economics Working Papers from Faculty of Humanities and Social Sciences, University of Tsukuba

Abstract: Does a county's trade significantly increase industry-level output? Are the impacts larger for differentiated industries than for homogeneous industries? To empirically answer these questions, we extend in two ways the Frankel and Romer (1999) method, which uses the geographical component of trade as an instrument. First, while Frankel and Romer look at impacts on the country-level output, we look at those on the industry-level output. Second, we introduce the index of an industry's differentiation based on Rauch (1999). Using a two-stage least square estimation and data for 20 manufacturing industries and 99 countries in 2015, we find that a country's trade significantly positively affects industry-level output and output per worker and the impacts are larger for the more differentiated industries.

Date: 2021-12
New Economics Papers: this item is included in nep-int
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