Discussion Paper Details
Please find the details for DP16741 in an easy to copy and paste format below:
Title: Globalization and the Ladder of Development: Pushed to the Top or Held at the Bottom?
Author(s): David Atkin, Arnaud Costinot and Masao Fukui
Publication Date: November 2021
Keyword(s): Capability, Complexity, Development and international trade
Programme Area(s): International Trade and Regional Economics
Abstract: We study the relationship between international trade and development in a model where countries differ in their capability, goods differ in their complexity, and capability growth is a function of a country's pattern of specialization. Theoretically, we show that it is possible for international trade to increase capability growth in all countries and, in turn, to push all countries up the development ladder. This occurs because: (i) the average complexity of a country's industry mix raises its capability growth, and (ii) foreign competition is tougher in less complex sectors for all countries. Empirically, we provide causal evidence consistent with (i) using the entry of countries into the World Trade Organization as an instrumental variable for other countries' patterns of specialization. The opposite of (ii), however, appears to hold in the data. Through the lens of our model, these two empirical observations imply dynamic welfare losses from trade that are small for the median country, but pervasive and large among a number of African countries.
For full details and related downloads, please visit: https://cepr.org/active/publications/discussion_papers/dp.php?dpno=16741
Atkin, D, Costinot, A and Fukui, M. 2021. 'Globalization and the Ladder of Development: Pushed to the Top or Held at the Bottom?'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=16741