ECON 416 Lecture Notes - Lecture 16: Free Trade
22 Nov 2017
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Document Summary
During the 80s, many ldcs abandoned their protectionist policies and embraced trade liberalization. Firms will have to be more competitive - with products coming from abroad. Marginal innovations will make a difference if you have a large market share. Each given firm will be incentivized to do better. The least efficient firms will be driven out of the market. But, market shares shrink, so net incentives may be lower. More likely to find cheaper and better inputs. We need causal estimates of the impact of trade openness on. We need causal estimates of the impact of trade openness on firm productivity. Pavcnik (2002) tries to deal with all these issues focusing on chile. During the 1974 to 1979 period, chile implemented a large trade liberalization program. Estimating productivity yit= ait k it l it and lnyit= lnait + alphalnkit + betalnlit.
