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Title: The Impact of Trade Liberalization on Industrial Productivity

Author(s): Paul Segerstrom and Yoichi Sugita

Publication Date: April 2014

Keyword(s): firm heterogeneity, industrial productivity and trade liberalization

Programme Area(s): International Trade and Regional Economics

Abstract: This paper calls into question the currently most influential model of international trade. An empirical finding by Trefler (2004, AER) and others that industrial productivity increases more strongly in liberalized industries than in non-liberalized industries has been widely accepted as evidence for the Melitz (2003, Econometrica) model. We show that a multi-industry version of the Melitz model does not predict this relationship. Instead, it predicts the opposite relationship that industrial productivity increases more strongly in non-liberalized industries than in liberalized industries.

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Bibliographic Reference

Segerstrom, P and Sugita, Y. 2014. 'The Impact of Trade Liberalization on Industrial Productivity'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=9952