Globalization, Productivity, and Growth: Aggregate and Plant-Level Implications

Project: Research project

Project Details


Since the Second World War countries have become increasingly open, both to foreign-made goods and to foreign technologies. The proposed research investigates how globalization affects productivity and growth, both at the aggregate and plant level. It aims to answer a number of open questions: What does increased openness imply for innovation and growth? To what extent will reductions in trade barriers lead to factory shutdowns and how much do surviving firms grow as they exploit greater export opportunities? To what extent does trade in machinery promote the diffusion of technology? What role do the capital goods exports of major innovating countries, such as the United States and Japan, play in the growth of developing countries?

The analytic framework for addressing these questions relates trade patterns to technological and geographical factors. Technologies evolve as countries innovate, creating greater differences in efficiency among countries, and, as ideas diffuse, eroding these differences. Countries that perform more R&D face less international competition since more of the technologies they use are still unknown to others. Firms in these countries consequently have greater market power.

Previous empirical work on these issues has been based largely on aggregate measures or has not used a consistent analytic framework. But aggregate data alone are not rich enough to provide insight into the effects of economic policies on individual firms. A feature of the framework here is its ability to combine aggregate and factory level data.

The proposed work has three components. First, the investigators will develop a multi-country model of innovation, diffusion, trade, and growth. Second, they will fit the model to aggregate data on trade flows, research effort, and productivity around the world, and to factory level data from the United States and France. Third, they will use the resulting framework as a quantitative tool to answer questions about the aggregate and firm-level effects of globalization.

Effective start/end date7/1/006/30/04


  • National Science Foundation: $297,744.00


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