SMU SOE Seminar (Apr 24, 2019): Productivity, (Mis)allocation and Trade

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TOPIC:

PRODUCTIVITY, (MIS)ALLOCATION AND TRADE

ABSTRACT We examine the impact of international trade on aggregate productivity. We show theoretically and numerically that bilateral and unilateral export liberalization increase aggregate welfare and productivity, while unilateral import liberalization can either raise or reduce them. However, all three trade reforms have ambiguous effects in the presence of resource misallocation. Using unique new data on 14 European countries and 20 manufacturing industries during 1998-2011, we empirically establish that exogenous shocks to both export demand and import competition generate large gains in aggregate productivity. Decomposing these gains, we find that both trade activities increase average firm productivity, but export expansion also reallocates activity towards more productive firms, while import penetration acts in reverse. We provide evidence for two adjustment mechanisms. First, both export and import exposure raise the minimum productivity among active firms. Second, efficient institutions, factor and product markets amplify the productivity gains from import competition, but dampen those from export expansion. We conclude that the effects of globalization operate through a combination of productivity-enhancing firm selection and reallocation across firms in the presence of resource misallocation. Keywords: International trade, Export demand, Import competition, Productivity, Olley-Pakes decomposition, Allocative efficiency, Misallocation. JEL Codes: F10, F14, F43, F62, O24, O40, O47. Click here to view the paper. Click here to view the CV.
		PRESENTER Kalina Manova University College London
		RESEARCH FIELDS International Trade Investment
		DATE: 24 April 2019 (Wednesday)
		TIME: 4pm - 5.30pm
		VENUE: Meeting Room 5.1, Level 5 School of Economics Singapore Management University 90 Stamford Road Singapore 178903

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