We are grateful for comments from Mauricio Mesquita Moreira, Christian Volpe, Carmen Pagés, Juan Carlos Hallak and two anonymous referees. All remaining errors are our own. The views and interpretations in this paper are strictly those of the authors and should not be attributed to the Inter-American Development Bank, its Board of Directors, or any of its member countries.
Trade Costs, Resource Reallocation and Productivity in Developing Countries
Version of Record online: 19 OCT 2012
© 2012 Blackwell Publishing Ltd
Review of International Economics
Volume 20, Issue 5, pages 909–923, November 2012
How to Cite
Blyde, J. and Iberti, G. (2012), Trade Costs, Resource Reallocation and Productivity in Developing Countries. Review of International Economics, 20: 909–923. doi: 10.1111/roie.12003
- Issue online: 19 OCT 2012
- Version of Record online: 19 OCT 2012
New trade models with heterogeneous firms suggest that international trade plays an important role in reallocating resources from low to high productivity plants. We use plant-level data from Chile and measures of trade costs that include tariffs and freight rates to analyze the importance of this trade-induced market selection process. We find that trade costs affect the reallocation process through the various channels predicted by the theory; however, the effects are approximately half of those reported for the US. We also find that while the tariff rate is responsible for preventing some of the reallocation, transportation costs have the most limiting role in terms of the number of channels affected.