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Trade and productivity: The family connection redux

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  • Prettner, Klaus
  • Strulik, Holger
Abstract
We investigate the effects of demographic change and human capital accumulation on trade and productivity of domestic firms. In so doing we integrate a micro-founded education and fertility decision of households into a model of international trade with firm heterogeneity. Our framework leads to four testable implications: i) the export share of a country increases in the education level of its population, ii) the export share of a country decreases in the birth rate of its population, iii) the average profitability of firms increases in the education level of a country, iv) the average profitability of firms decreases in the birth rate of a country. We find that all four implications are supported by empirical evidence for a panel of OECD countries from 1960 to 2010. Our results suggest that investments in human capital accumulation, especially in higher education, are an important determinant of a country's international competitiveness. Furthermore, falling birth rates need not be a serious concern with respect to productivity and international competitiveness of countries.

Suggested Citation

  • Prettner, Klaus & Strulik, Holger, 2013. "Trade and productivity: The family connection redux," University of Göttingen Working Papers in Economics 159, University of Goettingen, Department of Economics.
    • Handle: RePEc:zbw:cegedp:159
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    More about this item

    Keywords

    firm heterogeneity; international competitiveness; education; fertility decline;
    All these keywords.

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • I20 - Health, Education, and Welfare - - Education - - - General
    • J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends, Macroeconomic Effects, and Forecasts

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