Trade Liberalization, Heterogenous Firms and Growth

In static trade models with no market imperfections, the aggregate income and welfare of a small country grow when it opens to trade.  In endogenous growth models, trade liberalization boosts the growth effect generated by non-diminishing returns to factors of production, or learning-by-doing, or knowledge spillovers, or other forms of endogenous technological change.  Although important insights into the relationship between trade and growth can be derived from these models, the mechanism through which this process takes place is still not well-understood.  One promising perspective is offered by new trade models that focus on how the production choices made by heterogeneous firms affect growth.

The first set of models in the literature on growth with trade and heterogeneous firms is underpinned by the Melitz model.  Growth is driven by endogenous technology diffusion and trade is one of the components influencing firms’ technology choices.  In one study for example, given changes in trade costs, firms have to decide whether to upgrade their technology, taking into account the fixed costs of upgrading.  In another study, firms have to choose between process innovation (raising productivity) and product innovation (increasing variety).  In both approaches, static gains from trade are offset by a reallocation of labor from the production of goods to activities centred on market entry and product adoption.  Even though there is a loss in varieties produced and consumed, reductions in trade costs increase the rate of technology adoption and economic growth.

A second branch of the literature includes models that build on a Ricardian framework to analyze the effects of trade liberalization on the creation and diffusion of ideas.  This setting highlights the role of intermediate goods in the growth process in an environment with many asymmetric countries.  The setting also makes it possible to separate gains from trade into static and dynamic components.  The static component is based on the gains from specialization, underpinned by comparative advantage, whereas the dynamic component is derived from the gains through the flow of ideas.  This dynamic component of gains from trade is found to play an important role in explaining growth miracles in countries such as South Korea.  This result brings about a significant advance in our understanding of the relationship between trade openness and growth.  However, other growth channels are still open to investigation.  For example, in both branches of literature identified above, foreign direct investment was not part of the analyses but it clearly plays a role in knowledge transfer.

Alvarez, Fernando and Robert E. Lucas (2007) “General equilibrium analysis of the Eaton-Kortum model of international trade,Journal of Monetary Economics, 54(6): 1726-1768. [working paper]

Atkeson, Adrew and Ariel T. Burstein (2010) “Innovation, Firm Dynamics, and International Trade, ” Journal of Political Economy, 118 (3): 433–484. [working paper]

Coe, David and Elhanan Helpman (1995) “International R&D Spillovers, ” European Economic Review, 39 (5): 859-887. [working paper]

Buera, Paco and Erza Oberfield (2015) “Global Diffusion of Ideas,” Working Paper.

Eaton, Jonathan and Samuel Kortum (1999) “International Technology Diffusion: Theory and Measurement,” International Economic Review, 40 (3): 537-570.

Eaton, Jonathan and Samuel Kortum (2001) “Technology, trade, and growth: A Unified Framework,” European Economic Review, 45 (4-6): 742-755. [working paper]

Perla, Jesse, Christopher Tonetti and Michael Waugh (2015) “Equilibrium Technology Diffusion, Trade, and Growth, ” Working Paper.

Sampson, Thomas (2016) “Dynamic Selection: An Idea Flows Theory of Entry, Trade, and Growth,” Quarterly Journal of Economics, 131 (1): 315-380.

Welcome new members – March 2017

We would like to welcome the following new members of the InsTED network:

Prof. Swati Dhingra (London School of Economics) Her research interests are in international economics, trade policy and industrial organisation with focus on globalisation in the context of Britain and the EU, India, the US, Colombia and Thailand.

Prof. Mengxiao Liu (Syracuse University) Her research interests are international trade, organisational economics and network economics.

Prof. Kalina Manova (University of Oxford) Her research explores three themes in international economics: (i) the effects of financial frictions on international trade and multinational activity; (ii) the role of firm heterogeneity in productivity, product quality, and management practices; and (iii) the determinants and consequences of firm participation in global value chains.

Tommaso Sonno (London School of Economics) is a Ph.D. Candidate within the European Doctoral Program in Quantitative Economics, jointly organized by the Universite Catholique de Louvain and the London School of Economics.  Currently he is a visiting student at the Centre for Economic Performance.  His main areas of interest are international trade and political economy.

PhD Economics at York


We are recruiting new PhD students in Economics for the next academic year (2017-2018) and some PhD studentships are available:

As one of the largest economics departments in the UK we offer a great diversity of research expertise and research-led teaching. The Department has been constantly ranked top 10 in the UK and top 70 in the world. Our research strategy is founded on six research clusters, Microeconomic Theory, Macro economics and Finance, Econometrics, Applied Microeconometrics, Health Economics, and Economic History, which promote, sustain and monitor research excellence and embrace opportunities for external funding, as well as engagement with research users and impact. Our academic community of staff, students and visitors is both intellectually vibrant and international in perspective. We aim to deliver research excellence via contribution to discipline, research supervision and relevance to the broader economy and society.

Our PhD programme includes some taught PhD modules during their first two years. Nevertheless, the vast majority of a PhD student’s time is devoted to personal research work, which is conducted in regular consultation with the student’s supervisor(s). We are keen that our PhD students be involved in the general research and teaching of the Department. Students are expected to actively participate in seminars and workshops organised by the Department of Economics and to play an active role in the Department research clusters.

For more details on how to apply for a PhD in Economics and funding please see

Area of Study or Research:

  • Economics
  • Finance
  • Politics
  • Education
  • Statistics

Application Requirements:

  • Personal data/curriculum vitae
  • Personal Statement
  • English proficiency certificate
  • Research Proposal
  • Transcript of records



Conference: Tracking International Aid and Investment from Developing and Emerging Economies

Dear colleagues,

We invite submissions of one-page proposals for papers to be presented at our workshop “Tracking International Aid and Investment from Developing and Emerging Economies,” at Heidelberg University in Germany (September 22-23, 2017). Funding is available for 12 participants.

We will  grant pre-launch access to new datasets on georeferenced aid-like activities by China and India to selected researchers.

The submission deadline for the one-page proposals is May 1, 2017. Decisions will be send out on May 4.

Keynote speakers: David Dollar (Brookings Institution), Helen Milner (Princeton University), and Nancy Qian (Northwestern University)

Academic research on international aid and investment has largely focused on OECD countries as primary providers of such financing. In recent years, however, aid-like financial flows and foreign direct investments originating from developing and emerging economies, such as China and India, have become sizable. Proposals may either answer novel questions in economics, political science or other social sciences, or propose methodological advances related to the challenge of tracking developing and emerging countries’ aid and investments. Potential research questions include, but are not limited to:

  • What are the factors influencing emerging donors’ aid and investment flows?
  • What are their economic, political, social and environmental effects?
  • What are the methodological shortcomings of existing datasets and how can these be addressed?
  • Are the datasets made available by AidData and/or Heidelberg University reliable? How does the reliability of these data compare to alternative methods to estimate aid or investment flows from emerging economies?

More information can be found on our website:

Conference: 200 Years of Ricardian Trade Theory

Scientific Conference
“Celebrating 200 Years of Ricardian Trade Theory”
Birth of an Idea, Main Contribution, Modern Times and Impulses for Future Research in Trade Theory

At this international conference, renowned professors in economics present, discuss and reflect on aspects of Ricardian trade theory that goes back to Chapter 7 “On Foreign Trade” in David Ricardo’s ground-breaking book On the Principles of Political Economy and Taxation published in 1817. Keynote speakers present their thoughts on (1) the main contribution of Ricardian trade theory, (2) the environment and source of the original idea and (3) the importance of the Ricardian model for the new trade theory and empirical analyses. In (4) a final panel, experts in the field present their thoughts on the future development of trade theory in the light of current developments in societies and trade policy. There will be commentators in each session and enough time for discussion.

Confirmed Active Participants:
Prof. Harris Dellas (University of Berne)
Prof. Jonathan Eaton (Pennsylvania State University)
Prof. Peter Egger (ETH)
Prof. Wilfred J. Ethier (University of Pennsylvania)
Prof. Simon Evenett (University of St. Gallen)
Prof. Carsten Hefeker (University of Siegen)
Prof. Ronald W. Jones (University of Rochester)
Prof. Antonio Loprieno (University of Basel)
Prof. Esteban Rossi-Hansberg (Princeton University)
Prof. Roy J. Ruffin (University of Houston)
Prof. Nicolas Schmitt (Simon Fraser University)
Prof. M. Scott Taylor (University of Calgary)
Prof. Rolf Weder (University of Basel)

Conference Date: May 12, 2017
Deadline for paper submissions: Apr 3, 2017
Deadline for participant registration: Monday, May 1, 2017



Job Opportunity: Researchers Ifo Center for Business Cycle Analysis and Surveys

The Ifo Center for Business Cycle Analysis and Surveys has an immediate vacancy for two post-doctoral economists as

Researchers (m/f)

This Ifo Center conducts macroeconomic and econometric research, does economic policy advisory work and is also responsible for the Institute’s economic forecasts. The successful candidate will primarily work as part of a team on drafting the Joint Economic Forecasts and Ifo’s economic forecasts. His/her research area will be international macroeconomics. S/he will present research results at conferences and in articles for peer-reviewed journals. The successful candidate is also expected to contribute to the acquisition of third-party projects and will have the opportunity to teach and habilitate at the University of Munich.

Applicants should have a doctorate in economics, an excellent command of English and German, and proven knowledge of international business cycle analysis, as demonstrated by a track record of publishing articles in high-level journals. Experience with DSGE models and macro-econometric methods are also desirable. Candidates require a solid grasp of the theoretical basics of economics and Europe’s institutional framework conditions.

Compensation and benefits are based on the German public service pay scale (TV-L). The working contract is initially limited to three years.

As an equal opportunity employer, the Ifo Institute encourages applications from men and women. Women are expressly encouraged to apply.

Please send your complete application by 9 April 2017, preferably via email (as a pdf file) to to the Ifo Institute, Poschingerstraße 5, 81679 Munich. Should you have any queries, please contact Susanne Crefeld or Juliane Neumeier at .

Call for Papers: ETSG 2017 Florence 19TH Annual Conference 14-16 September 2017 European University Institute and University of Florence

This is the nineteenth conference in what is now the largest (and friendliest) annual conference on international trade in the world.

ETSG 2017 is being hosted by the Robert Schuman Centre for Advanced Studies at the European University Institute and the University of Florence (Italy). A website with details about location, hotels, and visa rules will be available.

The deadline to submit an abstract for possible presentation at the next ETSG Conference is FRIDAY APRIL 28, 2017. The Nineteenth Annual Conference of the ETSG will take place in Florence (Italy) on 14-16 September 2017.

Please visit the conference webpage ( for more information and submit your abstract on-line at

RIDGE Call for papers: Economic History, Energy and Natural Resources

The Research Institute for Development, Growth and Economics (RIDGE) is pleased to announce a call for papers for the Workshop on Economic History, Energy and Natural Resources to be held in Montevideo, Uruguay, on 26-27 May 2017. The deadline for submission is March 31, 2017 (12 AM ET).

RIDGE invites to send papers to this economic history workshop on all subjects of economic history provided they are particularly concerned with developing regions.

The workshop will be organized in two different sessions: the first one will be open to different topics of economic history, while the second one will focus on energy and natural resources in the economic history of developing regions.

One of the key debates in the field of economic development over the last two decades has been the relationship between the abundance of natural resources and economic development. Some ideas will be discussed: abundant natural resources are non-neutral for economic development; abundance is an endogenous process that responds to technological and institutional conditions, the characteristics of supply and demand, the linkages with other economic sectors, and the incidence of historical conditions; institutional quality is the main factor to deal with abundant natural resources. In this context, energy appears as an indispensable factor to generate wealth and welfare. No human activity is possible without energy use. In addition, to make it accessible and affordable energy sources must be transformed, and this process generates social relations and interaction between societies and their environment.
Diverse sources and forms of energy have been used over time and it has produced historical transitions. The analysis of the specificity of these processes allows us to discuss certain dynamics of economic development and inform us about their sustainability.

More information