Hysteresis and Heterogeneous Firms
Date Issued
2009
Date
2009
Author(s)
Wu, Wei-Te
Abstract
We embed the product innovation process and heterogeneous firmsodel into the Heckscher-Ohlin model to discuss what is the impact ofrade on growth, resource reallocations between firms, sectors and countries.ne novelty of this model is that trade can possibly endogenouslyenerates hysteresis effect,that is, a country complete specialize in the industryt has comparative advantage. Although trade liberalization improveshe average productivity in a level, it harms it in a dynamic growths Baldwin and Robert-Nicoud (2008) present. However, moving from autarkyo costly trade, we show the possibility that not only the averageroductivity increases in a level due to the Melitz’s effect, but the pro-growthffect overwhelmingly dominates the negative effect of trade onrowth in comparative advantage industry.
Subjects
hesteresis
heterogeneous firms
growth
comparative advantage
trade
SDGs
Type
thesis
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