NBER Working Papers and Publications
|September 2006||From Groundnuts to Globalization: A Structural Estimate of Trade and Growth|
with Christian Broda, David Weinstein: w12512
Starting with Romer  and Rivera-Batiz-Romer  economists have been able to model how trade enhances growth through the creation and import of new varieties. In this framework, international trade increases economic output through two channels. First, trade raises productivity levels because producers gain access to new imported varieties. Second, increases in the number of varieties drives down the cost of innovation and results in ever more variety creation. Using highly disaggregate trade data, e.g. Gabon's imports of Gambian groundnuts, we structurally estimate the impact that new imports have had in approximately 4000 markets per country. We then move from groundnuts to globalization by building an exact TFP index that aggregates these micro gains to obtain an estimate of tr...