Working Paper: NBER ID: w12512
Authors: Christian Broda; Joshua Greenfield; David Weinstein
Abstract: Starting with Romer [1987] and Rivera-Batiz-Romer [1991] economists have been able to model how trade enhances growth through the creation and import of new varieties. In this framework, international trade increases economic output through two channels. First, trade raises productivity levels because producers gain access to new imported varieties. Second, increases in the number of varieties drives down the cost of innovation and results in ever more variety creation. Using highly disaggregate trade data, e.g. Gabon's imports of Gambian groundnuts, we structurally estimate the impact that new imports have had in approximately 4000 markets per country. We then move from groundnuts to globalization by building an exact TFP index that aggregates these micro gains to obtain an estimate of trade on productivity growth for each country. We find that in the typical country in the world, new imported varieties account for 15 percent of its productivity growth. These effects are larger in developing countries where the median impact of new imported varieties equals a quarter of national productivity growth.
Keywords: trade; growth; productivity; imported varieties; globalization
JEL Codes: E00; F43; O4
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| New imported varieties (Q17) | Productivity growth (O49) |
| Growth in new traded varieties (F19) | Productivity growth in developing countries (O49) |
| Growth in new traded varieties (F19) | TFP growth in developing countries (O49) |
| New imported varieties (Q17) | TFP growth in developed countries (O49) |
| Overall growth in trade-to-GDP ratios (F10) | Import of new varieties (Q17) |