The Impact of Trade on Intraindustry Reallocation and Aggregate Industry Productivity : A Comment

Richard E. Baldwin, Frederic Robert-Nicoud

Melitz (2003) demonstrates that greater trade openness raises industry productivity via a selection effect and via a production re-allocation effect. Our comment points out that the set-up assumed in the Melitz model displays a trade off between static and dynamic efficiency gains. That is, although freer trade improves industry productivity in a level sense, it harms it in a growth sense. To make this point as simply as possible, we introduce a slight modification to the model that endogenises the growth rate of industry productivity and we show that liberalisation slows growth

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Year of publication:	August 2004
Authors:	Baldwin, Richard E.
Other Persons:	Robert-Nicoud, Frederic (contributor)
Institutions:	National Bureau of Economic Research (contributor)
Publisher:	Cambridge, Mass : National Bureau of Economic Research
Subject:	Produktivität \| Productivity \| Allokation \| Allocation \| Theorie \| Theory \| Handelsliberalisierung \| Trade liberalization \| Internationale Wirtschaft \| International economy \| Markteintritt \| Market entry

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