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Trade and productivity: The family connection redux

Klaus Prettner () and Holger Strulik ()

No 159, Center for European, Governance and Economic Development Research Discussion Papers from University of Goettingen, Department of Economics

Abstract: We investigate the effects of demographic change and human capital accumulation on trade and productivity of domestic firms. In so doing we integrate a micro-founded education and fertility decision of households into a model of international trade with firm heterogeneity. Our framework leads to four testable implications: i) the export share of a country increases in the education level of its population, ii) the export share of a country decreases in the birth rate of its population, iii) the average profitability of firms increases in the education level of a country, iv) the average profitability of firms decreases in the birth rate of a country. We find that all four implications are supported by empirical evidence for a panel of OECD countries from 1960 to 2010. Our results suggest that investments in human capital accumulation, especially in higher education, are an important determinant of a country's international competitiveness. Furthermore, falling birth rates need not be a serious concern with respect to productivity and international competitiveness of countries.

Keywords: firm heterogeneity; international competitiveness; education; fertility decline (search for similar items in EconPapers)
JEL-codes: F12 F14 I20 J11 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dem, nep-ifn, nep-int and nep-opm
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
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Related works:
Journal Article: Trade and productivity: The family connection redux (2018) Downloads
Working Paper: Trade and Productivity: The Family Connection Redux (2015) Downloads
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