Paper #580

Title:

Trade and productivity

Authors:

Francisco Alcalá and Antonio Ciccone

Date:

October 2001 (Revised: July 2002)

Abstract:

We estimate the effect of international trade on average labor productivity at the country level. Our empirical approach relies on summary measures of trade that, we argue, are preferable on both theoretical and empirical grounds to the one conventionally used. In contrast to the marginally significant and non-robust effects of trade on productivity found previously, our estimates are highly significant and robust even when we include institutional quality and geographic factors in the empirical analysis. We also examine the channels through which trade and institutional quality affect average labor productivity. Our finding is that trade works through labor efficiency, while institutional quality works through physical and human capital accumulation. We conclude with an exploratory analysis of the role of trade policies for average labor productivity.

Keywords:

Trade, productivity, institutions trade policy

JEL codes:

F43, O40

Area of Research:

Macroeconomics and International Economics

Published in:

Quarterly Journal of Economics, Vol. CXIX (2) , 613-646, May 2004

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