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American Economic Review: Vol. 101 No. 1 (February 2011)

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Trade Liberalization, Exports, and Technology Upgrading: Evidence on the Impact of MERCOSUR on Argentinian Firms

Article Citation

Bustos, Paula. 2011. "Trade Liberalization, Exports, and Technology Upgrading: Evidence on the Impact of MERCOSUR on Argentinian Firms." American Economic Review, 101(1): 304-40.

DOI: 10.1257/aer.101.1.304

Abstract

This paper studies the impact of a regional free trade agreement, MERCOSUR, on technology upgrading by Argentinean firms. To guide empirical work, I introduce technology choice in a model of trade with heterogeneous firms. The joint treatment of the technology and exporting choices shows that the increase in revenues produced by trade integration can induce exporters to upgrade technology. An empirical test of the model reveals that firms in industries facing higher reductions in Brazil's tariffs increase investment in technology faster. The effect of tariffs is highest in the upper-middle range of the firm-size distribution, as predicted by the model. (JEL F13, F15, O19, O24, O33)

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Authors

Bustos, Paula (CREI and U Pompeu Fabra)

JEL Classifications

F13: Trade Policy; International Trade Organizations
F15: Economic Integration
O19: International Linkages to Development; Role of International Organizations
O24: Development Planning and Policy: Trade Policy; Factor Movement; Foreign Exchange Policy
O33: Technological Change: Choices and Consequences; Diffusion Processes


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