Abstract
Empirical studies of trade reforms suggest that these reforms have a surprisingly small impact on a country's industrial configuration. This industrial structure inertia is difficult to rationalize in standard trade models. This paper develops a two-sector industry dynamics model in which industrial composition inertia arises naturally. The model is then used to study the consequences of different types of trade reforms (e.g. permanent, temporary, gradual, pre-announced) on investment, employment composition and income distribution. (C) 2000 Elsevier Science B.V. All rights reserved.
| Original language | English (US) |
|---|---|
| Pages (from-to) | 21-47 |
| Number of pages | 27 |
| Journal | Journal of International Economics |
| Volume | 51 |
| Issue number | 1 |
| DOIs | |
| State | Published - Jun 2000 |
Funding
We are grateful to Ronald Jones, Tim Kehoe, Kiminori Matsuyama, Enrique Mendoza, Kent Kimbrough, Pietro Peretto, Vincenzo Quadrini, Henry Siu, and two referees for their suggestions. We also benefited from the comments of seminar participants at the Bank of Portugal, Duke University, MIT, New York University, University of Toronto, the World Bank, and the 1997 Meetings of the Society for Economic Dynamics. We thank James Tybout for providing us with the Chilean census of manufacturing data for 1979-1986, and to Nina Pavcnik for sharing with us her Chile data set. Financial support from the National Science Foundation (Rebelo) and the Doctoral Scholarship Program of the Banco de Portugal (Albuquerque) is gratefully acknowledged.
Keywords
- Hysteresis
- Income distribution
- Industry dynamics
- Trade reform
ASJC Scopus subject areas
- Finance
- Economics and Econometrics
