Microeconomic Flexibility, Creative Destruction and Trade

No 2546, IDB Publications (Working Papers) from Inter-American Development Bank

Abstract: 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 firms expand through exporting and low-efficiency firms 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.

Keywords: IDB-WP-150 (search for similar items in EconPapers)
Date: 2009-12
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://publications.iadb.org/publications/english ... uction-and-Trade.pdf (application/pdf)

Related works:
Working Paper: Microeconomic flexibility, creative destruction and trade (2010)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:idb:brikps:2546

Access Statistics for this paper

More papers in IDB Publications (Working Papers) from Inter-American Development Bank Contact information at EDIRC.
Bibliographic data for series maintained by Felipe Herrera Library ().