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American Economic Review: Vol. 104 No. 3 (March 2014)

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Trade Adjustment and Productivity in Large Crises

Article Citation

Gopinath, Gita, and Brent Neiman. 2014. "Trade Adjustment and Productivity in Large Crises." American Economic Review, 104(3): 793-831.

DOI: 10.1257/aer.104.3.793

Abstract

We empirically characterize the mechanics of trade adjustment during the Argentine crisis. Though imports collapsed by 70 percent from 2000-2002, the entry and exit of firms or products at the country level played a small role. The within-firm churning of imported inputs, however, played a sizeable role. We build a model of trade in intermediate inputs with heterogeneous firms, fixed import costs, and roundabout production. Import demand is non-homothetic and the implications of an import price shock depend on the full distribution of firm-level adjustments. An import price shock generates a significant decline in productivity.

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Authors

Gopinath, Gita (Harvard U)
Neiman, Brent (U Chicago)

JEL Classifications

F14: Empirical Studies of Trade
F31: Foreign Exchange
F43: Economic Growth of Open Economies
L60: Industry Studies: Manufacturing: General
O14: Industrialization; Manufacturing and Service Industries; Choice of Technology
O19: International Linkages to Development; Role of International Organizations


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