Trade liberalization, exports and technology upgrading: evidence on the impact of MERCUSOR on Argentinean firms, American Economic Review, forthcoming

Abstract

This paper studies the impact of a regional free trade agreement, MERCOSUR, on technology upgrading by Argentinean firms. To guide empirical work, I introduce technology choice in Melitz’s (2003) model of trade with heterogeneous firms. The joint treatment of the technology adoption and exporting choices shows that the increase in revenues produced by trade integration can induce exporters to upgrade technology. An empirical test of the model reveals that firms in industries facing higher reductions in Brazil’s import tariffs increase their investment in technology faster and exporters upgrade technology faster than other firms in the same industry. This paper is a revised version of the second chapter of my Ph.D. dissertation at Harvard University. I would like to thank my advisors Philippe Aghion, Pol Antras, Elhanan Helpman and Marc Melitz for their guidance and support. For helpful suggestions and comments, I also wish to thank Ivan Fernandez-Val, Manue