Working Paper: NBER ID: w20881
Authors: Jesse Perla; Christopher Tonetti; Michael E. Waugh
Abstract: We study how opening to trade affects economic growth in a model where heterogeneous firms can adopt new technologies already in use by other firms in their home country. We characterize the growth rate using a summary statistic of the profit distribution—the mean-min ratio. Opening to trade increases the profit spread through increased export opportunities and foreign competition, induces more rapid technology adoption, and generates faster growth. Quantitatively, these forces produce large welfare gains from trade by increasing an inefficiently low rate of technology adoption and economic growth.
Keywords: trade; technology diffusion; economic growth; productivity; welfare gains
JEL Codes: A1; E1; F0; F4; O4
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| trade openness (F43) | profit spread (D33) |
| profit spread (D33) | technology adoption (O33) |
| technology adoption (O33) | economic growth (O49) |
| trade openness (F43) | welfare gains (D69) |