Politická ekonomie 2023, 71(2):104-129|DOI:10.18267/j.polek.1382
How Do Productivity Benefits Spill Over Across Firms? Explorations in a Heterogeneous Firm Applied General Equilibrium Trade Model
- Gouranga G. Das ORCID...a, Zeynep Akgul ORCID...b, Badri G. Narayanan ORCID...c
- aDepartment of Economics, Hanyang, University Erica Campus, Ansan, South Korea
- bCenter for Global Trade Analysis, Purdue University, USA
- cSchool of Environment and Forestry Sciences, University of Washington, Seattle, USA
Considerable diffusion of technology occurs via global trade and foreign direct investment (FDI) while firm heterogeneities cause considerable production heterogeneities. Hi-tech products and investment goods of differentiated varieties from emerging and developed economies are vehicles of superior technology. Given this stylized evidence, we analyse factors facilitating (or inhibiting) technological spillover to domestic firms in the host nations in a counterfactual scenario of a Trans-Pacific-Partnership (TPP) deal. By using a mixture interface of global computable general equi-librium (CGE) models of FDI (GTAP-FDI) and firm heterogeneity model of Global Trade Analysis Project, GTAP Heterogeneous (GTAP-HET), we calibrate impacts of trade and FDI spillovers on: (i) global production, (ii) trade patterns, (iii) welfare and (iv) regional productivity gains. Importance of regional trade agreements and policy for productivity spillovers is highlighted.
Keywords: GTAP, CGE, firm heterogeneity, FDI, productivity spillover, TPP
JEL classification: F11, F21, O24, O33
Received: February 11, 2022; Revised: October 16, 2022; Accepted: January 9, 2023; Published: April 25, 2023 Show citation
ACS | AIP | APA | ASA | Harvard | Chicago | IEEE | ISO690 | MLA | NLM | Turabian | Vancouver |
Das, G.G., Akgul, Z., & Narayanan, B.G. (2023). How Do Productivity Benefits Spill Over Across Firms? Explorations in a Heterogeneous Firm Applied General Equilibrium Trade Model. Politická ekonomie,71(2),104-129. doi:10.18267/j.polek.1382
Download citation
Open full article
References
- Aguiar, A., Narayanan, B., McDougall, R. (2016). An Overview of the GTAP 9 Data Base. Journal of Global Economic Analysis, 1(1), 181-208, https://doi.org/10.21642/JGEA.010103AF Go to original source...
- Akgul, Z., Villoria, N. B., Hertel, T. W. (2016). GTAP-HET: Introducing Firm Heterogeneity into the GTAP Model. Journal of Global Economic Analysis, 1(1), 111-180, https://doi.org/10.21642/JGEA.010102AF Go to original source...
- Anderson, J. E., Yotov, Y. V. (2016). Terms of trade and global efficiency effects of free trade agreements, 1990-2002. Journal of International Economics, 99, 279-298, https://doi.org/10.1016/j.jinteco.2015.10.006 Go to original source...
- Antràs, P. (2020). Conceptual aspects of Global Value Chains. World Bank Economic Review, 34(3), 551-574. Go to original source...
- Antràs, P., de Gortari, A. (2020). On the Geography of Global Value Chains. Econometrica, 84(4), 1553-1598, https://doi.org/10.3982/ECTA15362 Go to original source...
- Antràs, P., Chor, D. (2022). Global Value Chains. In: Gopinath, G., Helpman, E., Rogoff, K. Handbook of International Economics. Vol. 5. Amsterdam: Elsevier, 297-376. Go to original source...
- Almunia, M., Antràs, P., Lopez-Rodriguez, S., et al. (2021). Venting Out: Exports during a Domestic Slump. American Economic Review, 111(11), 3611-3662, https://doi.org/10.1257/aer.20181853 Go to original source...
- Baldwin, R. E., Robert-Nicoud, F. (2008). Trade and growth with heterogeneous firms. Journal of International Economics, 74(1), 21-34, https://doi.org/10.1016/j.jinteco.2007.05.004 Go to original source...
- Bednáø, M. (2019). Trade Policy Barriers to Imports of EU Goods to the USA: Importance of Liberalization of Trade Flows. Politická ekonomie, 67(3), 231-252, https://doi.org/10.18267/j.polek.1242 Go to original source...
- Breinlich, H., Cunat, A. (2016). Tariffs, Trade and Productivity: A Quantitative Evaluation of Heterogeneous Firm Models. Economic Journal, 126(595), 1660-1702, https://doi.org/10.1111/ecoj.12218 Go to original source...
- Bruno, R., Campos, N., Saul, E. (2017). The Benefits from Foreign Direct Investment in a Cross-Country Context: A Meta-Analysis. CEPR Discussion Paper No. DP11959.
- Borin, A., Mancini, M. (2016). FDI and Firm performance: An Empirical Analysis of Italian Firms. Review of World Economics, 152, 705-732, https://doi.org/10.1007/s10290-016-0255-z Go to original source...
- Ciuriak, D., Lapham, B., Wolfe, R., et al. (2015). Firms in International Trade: Trade Policy Implications of the New Trade Theory. Global Policy, 6(2), 130-140, https://doi.org/10.1111/1758-5899.12183 Go to original source...
- Ciuriak, D., Xiao, J., Dadkhah, A. (2017). Quantifying the Comprehensive and Progressive Agreement for Trans-Pacific Partnership. East Asian Economic Review, 21(4), 343-384, https://doi.org/10.11644/KIEP.EAER.2017.21.4.334 Go to original source...
- Das, G. G. (2002). Trade-induced Technology Spillover and Adoption: A Quantitative General Equilibrium Application. Journal of Economic Development, 27(2), 21-44.
- Das, G. G. (2014a). What role 'Learning'? A North-South Tale of Enrichment Effects. Romanian Journal of Economic Forecasting, 17(1), 67-85.
- Das, G. G. (2014b). Current Issues in International Trade: Methodologies and Development Implications for the World Economy. New York: Nova Science Publishers. ISBN 978-1-63321-405-7.
- Das, G. G. (2015). Why some countries are slow in acquiring new technologies? A Model of Trade-led Diffusion and Absorption. Journal of Policy Modelling, 37, 65-91, https://doi.org/10.1016/j.jpolmod.2015.01.001 Go to original source...
- Das, G. G. (2019). Ability-Biased Technical Change and Productivity Bonus in a Nested Production Structure: A Theoretical Model with Endogenous Hicks-Neutral Technology Spillover. Scientific Annals of Economics and Business, 66(3), 415-450. Go to original source...
- Das, G. G., Powell A. A. (2001). Absorption Capacity, Structural Similarity and Embodied Technology Spillovers in a 'Macro' model: An Implementation within a Computable General Equilibrium Framework. The Korean Journal of Policy Studies, 16(1), 111-132. Go to original source...
- Das, G. G. Akgul, Z., Gopalakrishnan, B. N. (2017). Productivity Spillovers and Absorptive Capacity: An analysis in a Heterogeneous firm CGE model. Annual Conference on Global Economic Analysis. West Lafayette, IN, USA, 7-9 July 2017. Retrieved from: https://www.gtap.agecon.purdue.edu/resources/res_display.asp?RecordID=5319
- Dixon, P. B., Jeries, M., Rimmer, M. T. (2018). Trade theory in CGE Models. Armington, Krugman, and Melitz. Berlin: Springer. Go to original source...
- Eaton, J., Kortum, S. (1999). International Technology Diffusion: Theory and Measurement. International Economic Review, 40, 537-570. Go to original source...
- Eaton, J., Kortum, S. (2002). Technology, Geography, and Trade. Econometrica, 70(5), 1741-1779. Go to original source...
- Falvey, R., Greenaway, D., Yu, Z. (2011). Catching Up or Pulling Away: Intra-Industry Trade, Productivity Gaps and Heterogeneous Firms. Open Economies Review, 22(1), 17-38, https://doi.org/10.1007/s11079-010-9172-2 Go to original source...
- Falvey, R., Foster-McGregor, N. (2022). The breadth of preferential trade agreements and the margins of exports. Review of World Economics, 158, 181-251., https://doi.org/10.1007/s10290-021-00430-5 Go to original source...
- Farole, T., Winkler, D. (2012). Foreign firm characteristics, absorptive capacity and the institutional framework: the role of mediating factors for FDI spillovers in low- and middle-income countries. Policy Research Working Paper Series 6265. Go to original source...
- f*ckui T., Lakatos, C. (2012). A Global Database of Foreign Affiliate Sales. USITC and GTAP Working Paper No. 6037. Go to original source...
- Girma, S., Kneller, R., Pisu, M. (2007). Do exporters have anything to learn from foreign multinationals? European Economic Review, 51(4), 993-1010. Go to original source...
- Gorodnichenko, Y., ©vejnar, J., Terrell, K. (2014). When does FDI have positive spillovers? Evidence from 17 transition market economies. Journal of Comparative Economics, 42(4), 954-969, https://doi.org/10.1016/j.jce.2014.08.003 Go to original source...
- Gorodnichenko, Y., ©vejnar, J., Terrell, K. (2015). Does Foreign Entry Spur Innovation? NBER Working Paper No. 21514. Go to original source...
- Hanoch, G. (1971). CRESH Production Functions. Econometrica, 39(5), 695-712, https://doi.org/10.2307/1909573 Go to original source...
- Hanousek, J., Kocenda, E., Vozarova, P. (2020). Impact of Multinational Enterprises on Competition, Productivity and Trade Spillovers across European Firms. Finance a úvìr - Czech Journal of Economics and Finance, 70(2), https://doi.org/10.32065/CJEF.2020.02.04 Go to original source...
- Helpman, E., Melitz, M., Yeaple, S. (2004). Export versus FDI with heterogeneous firms. The American Economic Review, 94(1), 300-316, https://doi.org/10.1257/000282804322970814 Go to original source...
- Herman, P. R. (2022). Modeling complex network patterns in international trade. Review of World Economics, 158, 127-179, https://doi.org/10.1007/s10290-021-00429-y Go to original source...
- Hertel, T. (1996). Global Trade Analysis: Modeling and Applications. Cambridge: Cambridge University Press. ISBN 9781139174688. Go to original source...
- Hsieh, C.-T., Li, N., Ossa, R., et al. (2016), Accounting for the New Gains from Trade Liberalization. NBER Working Paper No. W22069. Go to original source...
- Keller, W. (2004). International Technology Diffusion. Journal of Economic Literature, 42(3), 752-782, https://doi.org/10.1257/0022051042177685 Go to original source...
- Keller, W., Yeaple, S. R. (2013). The Gravity of Knowledge. American Economic Review, 103(4), 1414-1444, https://doi.org/10.1257/aer.103.4.1414 Go to original source...
- Lakatos, C., f*ckui, T. (2014). The Liberalization of Retail Services in India. World Development, 59, 327-340, https://doi.org/10.1016/j.worlddev.2014.01.013 Go to original source...
- Latorre, M. C., Yonezawa, H. (2017). Stopped TTIP? Its potential impact on the world and the role of neglected FDI. MPRA Paper No. 77162. Go to original source...
- Li, Q., Scollay, R., Gilbert, J. (2018). Analyzing the effects of the Regional Comprehensive Economic Partnership on FDI in a CGE Framework with Firm Heterogeneity. Economic Modeling, 67(C), 409-420, https://doi.org/10.1016/j.econmod.2017.07.016 Go to original source...
- Lucas, R. E. Jr. (2015). Human Capital and Growth. American Economic Review, 105(5), 85-88, https://doi.org/10.1257/aer.p20151065 Go to original source...
- Meriküll, J., Poltimäe, H., Paas, T. (2011). Regional Technology Spillovers: The Case of Central and Eastern European Countries. ERSA conference papers ersa10p931.
- Merlevede, B., Purice, V. (2019). Border regimes and indirect productivity effects from foreign direct investment. Working Paper of Department of Economics Ghent University No. 2019/965. Go to original source...
- Melitz, M. (2003). The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity. Econometrica, 71(6), 1695-1725. Go to original source...
- Narayanan, G. B., Singh, H. V., Ciuriak, D. (2016). Quantifying trans-pacific partnership and transatlantic trade and investment partnership spillovers on India. In: Singh, H. V. TPP and India: Implications of Mega-regionals for Developing Economies, 133-197. New Delhi: Wisdom Tree. ISBN 9788183284608.
- Olney, W. E. (2022). Intra-African Trade. Review of World Economics, 158, 25-51, https://doi.org/10.1007/s10290-021-00421-6 Go to original source...
- Petri, P. A., Plummer, M. G., Zhai, F. (2014). The TPP, China and the FTAAP: The Case for Convergence. In: Tang, G., Petri, P. A. New Directions in Asia-Pacific Economic Integration. Honolulu: East-West Center. ISBN 978-0-86638-250-2. Go to original source...
- Petri, P. A., Plummer, M. G., Urata, S., et al. (2021). The Economics of the CPTPP and RCEP: Asia Pacific Trade Agreements without the United States. In: Lee, C., Bhattacharya, P. The Comprehensive and Progressive Agreement for Trans-Pacific Partnership: Implications for Southeast Asia, 12-29. Singapore: ISEAS Publishing. Go to original source...
- Pica, A., Sicari, P. (2022). Enhancing regional convergence in the European Union. OECD Economics Department Working Paper No. 1696, https://doi.org/10.1787/18151973 Go to original source...
- Procházková Ilinitchi, C., Pustovalová A., Procházka, D. (2021). Elasticity of substitution in the manufacturing sector in the Czech Republic. Politická ekonomie, 69(4), 435-456, https://doi.org/10.18267/j.polek.1324 Go to original source...
- Spearot, A. (2016). Unpacking the Long-Run Effects of Tariff Shocks: New Structural Implications from Firm Heterogeneity Models. American Economic Journal: Microeconomics, 8(2), 128-167, https://doi.org/10.1257/mic.20140015 Go to original source...
- Syverson, C. (2011). What Determines Productivity? Journal of Economic Literature, 49(2), 326-365, https://doi.org/10.1257/jel.49.2.326 Go to original source...
- Ullah, S., Luo, R., Ali, K. (2022). How does the sectoral composition of FDI induce economic growth in developing countries? The key role of business regulations. Economic Research-Ekonomska Istra¾ivanja, https://doi.org/10.1080/1331677X.2022.2129406 Go to original source...
- Vujanoviæ, N., Stojèiæ, N., Hashi, I. (2021). FDI spillovers and firm productivity during crisis: Empirical evidence from transition economies. Economic Systems, 45(4), 100865, https://doi.org/10.1016/j.ecosys.2021.100865 Go to original source...
- Yeaple, S. R. (2005). A simple model of firm heterogeneity, international trade, and wages. Journal of International Economics, 65(1), 1-20, https://doi.org/10.1016/j.jinteco.2004.01.001 Go to original source...
- Yeaple, S. R. (2009). Firm heterogeneity and the structure of U.S. multinational activity. Journal of International Economics, 78(2), 206-215, https://doi.org/10.1016/j.jinteco.2009.03.002 Go to original source...
This is an open access article distributed under the terms of the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License (CC BY NC ND 4.0), which permits non-comercial use, distribution, and reproduction in any medium, provided the original publication is properly cited. No use, distribution or reproduction is permitted which does not comply with these terms.
Return to the content