Blyde, Juan and Pineda, Jose (2010): Microeconomic flexibility, creative destruction and trade.
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We investigate whether greater microeconomic flexibility facilitates the process of creative destruction in the context of new trade models with heterogeneous firms (Bernard et al., 2003 and Melitz, 2003). In these models, freer trade increases aggregate productivity because high-efficiency plants expand through exporting and low-efficiency plants exit the market. However, factor reallocation could be negatively affected by the presence of microeconomic frictions. We use these insights of the theory to analyze whether a reduction in trade costs increases the probability of becoming an exporter relatively more in industries with greater microeconomic flexibility and whether plant exit driven by trade costs declines is more likely in industries with lower frictions. Using plant level data from Venezuela, we report results supporting these predictions.
|Item Type:||MPRA Paper|
|Original Title:||Microeconomic flexibility, creative destruction and trade|
|Keywords:||Trade costs, microeconomic frictions, resource reallocation|
|Subjects:||F - International Economics > F1 - Trade > F13 - Trade Policy; International Trade Organizations
F - International Economics > F1 - Trade > F14 - Empirical Studies of Trade
L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance
O - Economic Development, Technological Change, and Growth > O1 - Economic Development > O12 - Microeconomic Analyses of Economic Development
|Depositing User:||Juan Blyde|
|Date Deposited:||18. Mar 2010 18:28|
|Last Modified:||13. Feb 2013 16:55|
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