Learning Externalities and International Trade

It has long been recognized that the dynamic effects of trade, such as the learning externalities that drive technological change, are likely to dwarf the static gains.  According to the oral tradition in economics, the literature tended to focus on the static gains because the dynamic effects were poorly understood and supposedly impossible to measure.  Yet recent work conducting natural and field experiments has found large effects from learning externalities associated with international trade, potentially shattering the received wisdom that this type of effect cannot be measured.

Perhaps the oldest and best known learning externality of trade is associated with the infant industry argument for protection.  A developing country’s transformation curve shifts over time partly due to the learning-by-doing effect of “experience” in raising manufacturing productivity.  As a result the manufacturing sector is too small under laissez faire.  There is an efficiency gain to protecting or subsidising the manufacturing sector because the additional manufacturing output contributes to social benefit by enhancing future productivity.  Two challenges arise with identifying empirically the effects of infant industry protection.  First, even if the industry becomes competitive after receiving protection it is difficult to know whether it would have become competitive anyway.  Second, in the case of a policy intervention, it is not possible to disentangle the effect of the market imperfection from the effect of the policy intervention itself.  A recent paper by Réka Juhász has addressed both issues by treating the protective effect on the French cotton industry of the Napoleonic Wars (1803-1815) as a natural experiment.  Exogenous within-country variation in the effectiveness of the naval blockade makes it possible to address the first challenge identified above.  The fact that the protection does not arise as the result of a policy addresses the second.  The results show that areas that received a larger trade cost shock during the Napoleonic Wars increased production capacity in mechanised cotton spinning to a larger extent than areas which received a smaller shock.  This research suggests that economically significant learning effects can arise from protection.  Future research could usefully ask how to obtain these effects without falling into the usual traps that accompany protective interventions.

“Learning from exporting” is perhaps the newest type of learning externality to be identified in the literature on international trade and appears to have emerged from policy circles.  Early attempts to identify this effect found little evidence of it, finding instead that more productive firms tended to select into exporting and not the other way around.  But recent research by David Atkin, Amit Khandelwal and Adam Osman based on a randomised trial conducted in Egypt offers compelling evidence to the contrary.  The trial randomly assigns access to international markets across a sample of firms, making it possible to causally identify the impact of exporting on profits and productivity.  Treatment firms report 15-25 percent higher profits and exhibit large improvements in quality alongside reductions in output per hour relative to control firms.  These important results give rise to a new research agenda to understand the apparent conflict between the failure of early attempts to find learning externalities and the success of these new results.  A related question that could usefully be explored in future research concerns the extent to which these results vary with the quality of domestic institutions such as the rule of law and enforcement of property rights.

Baldwin, R., and P.R. Krugman, (1986); “Market Access and International Competition: A Simulation Study of 16K Random Access Memories.” NBER Working Paper no. 1936.

Bernard, A.B. and J.B. Jensen, (1999); “Exceptional Exporter Performance: Cause, Effect, or Both?Journal of International Economics, 47: 1-25. [Working paper version]

Bond, E.W., and Y. Ma, (2013); “Learning by Doing and Fragmentation,” Pacific Economic Review, 18(5): 603-627.

Clerides, S.K., S. Lach and J.R. Tybout, (1998); “Is Learning by Exporting Important? Microdynamic Evidence from Columbia, Mexico and Morocco.Quarterly Journal of Economics 113, 903-947.

De Loecker, J., (2007); “Do Export Generate Higher Productivity? Evidence from Slovenia.”  Journal of International Economics, 73: 609-644. [Working paper version]

Head, K. (1994); “Infant Industry Protection in the Steel Rail Industry.Journal of International Economics, 37(3), 141-165.

Irwin, D.A., (2000); “Did Late-Nineteenth-Century US Tariffs Promote Infant Industries? Evidence from the Tinplate Industry.The Journal of Economic History, 60(2): 335-360. [Working paper version]

Juhasz, R., (2014); “Temporary Protection and Technology Adoption: Evidence from the Napoleonic Blockade.” CEP Discussion Paper no. 1322.

Keller, W., (2004); “International Technology Diffusion.Journal of Economic Literature, 43: 752-782. [Working paper version]

Rhee, Y., B. Ross-Larson and G. Pursell (1984); Korea’s Competitive Edge: Managing the Entry into World Markets. Johns Hopkins University Press for the World Bank, Baltimore, MD.

New Working Papers – October 2015

The following working papers have recently been added to our working papers page.

Handley, Kyle and Nuno Limao (2014) “Policy Uncertainty, Trade and Welfare: Theory and Evidence for China and the U.S.

Lashkaripour, Ahmad (2015) “Beyond Gravity: the Composition of Multilateral Trade Flows

Leibovici, Fernando (2015) “Financial Development and International Trade”  

Lugovskyy, Volodymyr and Alexandre Skiba (2015) “Positive and Negative Effects of Distance on Export Prices



Welcome new members

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

Prof. Christian Robert Ahlin (Michigan State University) His research interests are in micro-finance, finance and development, matching and group formation, corruption and development, inequality, and industrial organization.

Prof. Dominick Bartelme (University of Michigan) His research interests are international trade, economic geography, and economic growth.

Prof. Christian Bogmans (University of Birmingham) His main research interests are in the fields of environmental and energy economics, and international trade.

Prof. Michael Callen (Harvard University) His research fields are development economics, political economy, and experimental economics

Prof. Jenny Guardado (Georgetown University) Her research examines the political and economic mechanisms affecting armed conflict, corruption, and economic development.

Saad Gulzar (New York University) His research interests are in political economy of development, governance, and technology.

Dr. Réka Juhász (Princeton University) Her research interests are in international trade, economic history, and  development and growth.

Gaurav Khanna (University of Michigan) His research focuses on education policy, high skill immigration, infrastructure, and public-works programs and conflict.

Dr. Tim Larsen (Vanderbilt University) His fields of interest are economic history, labor, development, and political economy

Dr. Stephan Litschig (The Institute for Economic Analysis) His research interests are development economics, public economics, political economics, and micro-econometrics.

Prof. Mary E. Lovely (Syracuse University) Her research interests are in international economics, and public economics.

Prof. Devashish Mitra (Syracuse University) His research interests are in international trade, political economy, and development economics.

Prof. Rahul Mukherjee (Graduate Institute for International and Development Studies) His broad areas of research are international macroeconomics, and finance.

Prof. Lourenço Paz (Baylor University) His research focuses on how international trade affect developing countries.

Prof. Thorsten Rogall (University of British Columbia) His recent work in progress are on the topics of income inequality and conflict, organized violence and voting, and community meetings.

Prof. Georg Schaur (University of Tennessee) His publications are in the filed of international economics, economic education, and environmental economics.


Call for Papers: Development Economics and Policy

Annual International Conference of the German Economic Association

Research Group on Development Economics

Hosted by Heidelberg University, 3-4 June 2016 in Heidelberg

***Keynote Speakers***

Jean-Phillipe Platteau
(Emeritus Professor, University of Namur and Centre for Research in Economic Development (CRED))

Philip Keefer
(Principal Economic Advisor, Inter-American Development Bank)

The annual conference brings together international scholars and researchers of development economics and neighboring fields. Plenary sessions with keynote speakers, and parallel sessions with contributed papers and posters will reflect the current state of research in development economics and provide a forum for exchange for researchers and practitioners.

Interested contributors are invited to fill a submission form on www.entwicklungsoekonomischer-ausschuss.de and upload their full anonymized paper before February 15th. Acceptance notes with detailed information will be sent by early April 2016. The conference will start in the afternoon of June 3, 2016 with a keynote speech and a reception for all participants. There will be a conference fee of Euro 50.

Local organizers:
Prof. Dr. Axel Dreher (Alfred-Weber-Institute for Economics, Heidelberg University)
Prof. Dr. Stefan Klonner (South Asia Institute, Heidelberg University)

Workshop: Networks, Complexity, and Economic Development – Centre for Economic and Regional Studies, Hungarian Academy of Sciences (MTA KRTK) Budapest, Hungary

The Economics of Networks Research Unit at Centre for Economic and Regional Studies of Hungarian Academy of Sciences is pleased to announce the workshop on “Networks, Complexity, and Economic Development”.

Networks are one of the central challenges of today’s science and the analysis of large-scale social networks integrates scholars from a wide variety of sciences in understanding complex social and economic phenomena. The workshop aims to establish a platform for interdisciplinary discussions focusing on economic development.

Invited talks

Cesar A. Hidalgo, MIT

“Why Information Grows: The Evolution of Order, from Atoms to Economies”

“The shapes of the city: new computational methods to understand urban perception, gentrification, and economic agglomerations at the neighborhood scale” (with Edward Glaeser)

 Ádám Szeidl, CEU and CEPR

“Interfirm Relationships and Business Performance” (with Jing Cai)

Balázs Vedres, CEU

“Fragility in European economic integration: Lessons from the network of inter-industries flow data”



We invite PhD students, and early career researchers from economics, sociology, geography, computational social science, and network science to present a paper and discuss future research. Interested fellows from other fields might submit an abstract as well. Papers that address the following topics are particularly (but not exclusively) welcome:

  • Economics of social networks
  • Dynamics of large scale economic networks
  • Innovation and spreading
  • Human mobility and networks
  • Networks of international trade
  • Proximity and economic development
  • Social networks and performance

The workshop is open to the public; however, due to place limitations, registration is required.



  • Abstract submission: 19 October 2015
  • Notification of acceptance: 26 October 2015
  • Registration: 16 November 2015
  • Workshop: 30 November – 1 December 2015

Workshop website

Excellence Award in Global Economic Affairs 2016

Kiel Institute for the World Economy

Economists until the age of 35 (born 1980 or later) are invited to apply for this award by submitting up to three published or unpublished papers in the field of global economic affairs, and specifically pertaining to the following areas:

• International Trade and FDI
• Knowledge Creation and Growth
• Poverty Reduction, Equity and Development
• Environmental Policy
• Reforming the Welfare Society
• Labour Market Policy
• Monetary Policy
• Financial Markets and Macroeconomic Activity
• Behavioural Economics

Submission of a paper does not preclude publication in the standard outlets. Submitted papers may include coauthored papers. The aim of the Excellence Award is to build a community of the brightest young researchers in the area of global economic affairs. Submitted papers will be evaluated by a jury. The top contestants will be granted the “Excellence Award in Global Economic Affairs” at a prize-giving ceremony at the Kiel Institute. In addition, they will receive a Research Fellowship at the Kiel Institute, entitling them to a research visit to the Institute, all expenses paid. Research Fellows will receive research support, access to the Institute’s Virtual Research Communities and the opportunity to participate in the Institute’s research projects and events. There are four named Research Fellowships: the “Horst Siebert Fellowship”, the “Porsche Fellowship”, the “Landeshauptstadt Kiel Fellowship” and the “Birke Hospitality Fellowship”. Further information is provided on the Excellence Award website. Staff members of the Kiel Institute and of the sponsoring organizations are not eligible for the fellowship. Papers should be submitted as email attachment to kristina.sander@ifw-kiel.de together with a CV that includes the birth date. The submission deadline is Oct. 31, 2015.

Job Opportunity: Full Professor or Assistant Professor (tenure track) in Development Economics – HEC Lausanne

The starting date is August 1st, 2016, or upon mutual agreement.

The successful candidate will be a member of the Department of Economics at HEC Lausanne. Our department aims at hiring first-rate international researchers.

Applicants must hold a PhD in economics with a specialization in Development Economics (both Micro or Macro). Preference will be given to candidates with a confirmed capacity to publish in leading academic journals and with solid experience in university-level teaching. The rank of appointment will be determined by the candidate’s publication record and academic experience.

The successful candidate will be expected to be able to teach in French after two years. A detailed job description and the electronic application form are available at: www.hec.unil.ch.

Applications must be submitted online using the above link until December 1st, 2015 (11.59 pm local time). Please fill in the electronic application form, including the names and addresses of three references maximum, and upload your curriculum vitae, a cover letter and samples of your scholarly work via the same site. Candidates should indicate in their cover letter whether they will be available for interviews at the January 2016 AEA Meeting in San Francisco.

Additional information can be obtained from Professor Olivier Cadot () or Professor Dominic Rohner ().

Seeking to promote a balanced representation of men and women among its academic staff, the University encourages women to apply.