Equilibrium Technology Diffusion, Trade, and Growth
AbstractWe study how opening to trade affects economic growth in a model where heterogeneous firms can adopt new technologies already in use by other firms in their home country. We characterize the growth rate using a summary statistic of the profit distribution: the mean-min ratio. Opening to trade increases the profit spread through increased export opportunities and foreign competition, induces more rapid technology adoption, and generates faster growth. Quantitatively, these forces produce large welfare gains from trade by increasing an inefficiently low rate of technology adoption and economic growth.
CitationPerla, Jesse, Christopher Tonetti, and Michael E. Waugh. 2021. "Equilibrium Technology Diffusion, Trade, and Growth." American Economic Review, 111 (1): 73-128. DOI: 10.1257/aer.20151645
- D21 Firm Behavior: Theory
- D24 Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
- F14 Empirical Studies of Trade
- F43 Economic Growth of Open Economies
- O33 Technological Change: Choices and Consequences; Diffusion Processes