Trade Openness and Cross-country Income Differences

Arbeitspapier

Development accounting literature usually attributes the observed cross-country variation in per capita income to differences in countries' factor endowments and total factor productivity (the Solow residual). While the former can be relatively straightforward interpreted and measured, the latter remains at least partly a black box. In this paper, we provide a structural interpretation for differences in total factor productivity across countries and quantitatively explore the role of trade barriers in explaining cross-country income differences. In particular, we find that giving all countries the same market entry costs or giving all country-pairs the same variable trade costs reduces inequality by around 13%.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: SFB/TR 15 Discussion Paper ; No. 402

Classification and Topics

• Classification: Wirtschaft ; Neoclassical Models of Trade ; Models of Trade with Imperfect Competition and Scale Economies; Fragmentation ; Economic Development: General ; Economic Growth and Aggregate Productivity: General
• Subject: General equilibrium ; market access costs ; development accounting ; experiments

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Hepenstrick, Christian ; Tarasov, Alexander
• Event: Veröffentlichung
• (who): Sonderforschungsbereich/Transregio 15 - Governance and the Efficiency of Economic Systems (GESY)
• (where): München
• (when): 2013

Further information

• DOI: doi:10.5282/ubm/epub.15421
• Handle: http://hdl.handle.net/10419/93838
• URN: urn:nbn:de:bvb:19-epub-15421-8
• Last update: 10.03.2025, 11:41 AM CET