Endogenous firm heterogeneity and the dynamics of trade liberalization

Josh Ederington, Phillip McCalman

Research output: Contribution to journalArticlepeer-review

57 Scopus citations

Abstract

In this paper, we build a dynamic model with endogenous firm-level productivity that involves ex ante identical firms behaving differently in equilibrium. Heterogeneity arises in equilibrium as firms choose different dates to adopt a new technology. We investigate the effects of international trade on technological diffusion and show that trade has a generally positive impact on the equilibrium rate of adoption (and hence on firm-level productivity). In addition, the model can replicate the stylized fact that exporters are larger and more productive than non-exporters. Finally, we show how our model can be used to interpret the emerging empirical evidence on the firm-level productivity effects of CUSFTA.

Original languageEnglish
Pages (from-to)422-440
Number of pages19
JournalJournal of International Economics
Volume74
Issue number2
DOIs
StatePublished - Mar 2008

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics

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