Citation

Discussion Paper Details

Please find the details for DP5563 in an easy to copy and paste format below:

Full Details   |   Bibliographic Reference

Full Details

Title: Trade and Growth with Heterogenous Firms

Author(s): Richard Baldwin and Frédéric Robert-Nicoud

Publication Date: March 2006

Keyword(s): dynamic versus static efficiency, heterogeneous firms and trade and endogenous growth

Programme Area(s): International Trade and Regional Economics

Abstract: This paper explores the impact of trade on growth when firms are heterogeneous. We find that greater openness produces anti-and pro-growth effects. The Melitz-model selection effects raises the expected cost of introducing a new variety and this tends to slow the rate of new-variety introduction and hence growth. The pro-growth effect stems from the impact that freer trade has on the marginal cost of innovating. The balance of the two effects is ambiguous with the sign depending upon the exact nature of the innovation technology and its connection to international trade in goods and ideas. We consider five special cases (these include the Grossman-Helpman, the Coe-Helpman and Rivera-Batiz-Romer models) two of which suggest that trade harms growth; the others predicting the opposite.

For full details and related downloads, please visit: https://cepr.org/active/publications/discussion_papers/dp.php?dpno=5563

Bibliographic Reference

Baldwin, R and Robert-Nicoud, F. 2006. 'Trade and Growth with Heterogenous Firms'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=5563