Template-Type: ReDIF-Paper 1.0

Author-Name:  Foellmi, Reto
Author-Name-First: Reto
Author-Name-Last: Foellmi

Author-Name:  Oechslin, Manuel
Author-Name-First: Manuel
Author-Name-Last: Oechslin

Title: Globalization and Productivity in The Developing World
Abstract: We explore the impact of international trade in a monopolistically competitive economy that encompasses technology choice and an endogenous distribution of mark-ups due to credit frictions. We show that in such an environment a gradual opening of trade may but not necessarily must have a negative impact on productivity and overall output. The reason is that the pro-competitive effects of trade reduce mark-ups and hence make access to credit more difficult for smaller firms (an implication we substantiate using firm-level data from Latin America). As a result, smaller firms - while not driven out of the market - may be forced to switch to less productive technologies. Our framework matches several salient patterns in the empirical literature on the impact of trade in developing countries.
Creation-Date:  2014-04-30
File-URL: http://www.wti.org/media/filer_public/1c/4b/1c4bda90-d168-47dd-ae72-9626d0742eda/foellmi_oechslin_nccr2014-11.pdf
File-Format: Application/pdf
File-Function: First version
Handle: RePEc:wti:papers:713