Jobs at IWH
Vacancies at IWH The Halle Institute for Economic Research (IWH) – Member of the Leibniz Association was founded in 1992. IWH’s tasks are economic research and science-based...
Tasks of the IWH Guided by its mission statement , the IWH places the...
Research Profiles of the IWH Departments All doctoral students are allocated to one...
LRF Research Profile
Research Profile of the Department of Laws, Regulations and Factor Markets The ...
The CompNet Competitiveness Database The Competitiveness Research Network (CompNet)...
Productivity: More with Less by Better Available resources are scarce. To sustain our...
IWH-CompNet Discussion Papers
IWH-CompNet Discussion Papers The IWH-CompNet Discussion Paper series presents research...
Three Research Clusters ...
Membership Five Good Reasons for Becoming a Member of the Halle Institute for...
Total Factor Productivity and the Terms of Trade
IWH-CompNet Discussion Papers,
In this paper we analyse how the terms of trade (TOT) – the ratio of export prices to import prices – affect total factor productivity (TFP). We provide empirical macroeconomic evidence for the European Union countries based on the times series SVAR analysis and microeconomic evidence based on industry level data from the Competitiveness Research Network (CompNet) database which shows that the terms of trade improvements are associated with a slowdown in the total factor productivity growth. Next, we build a theoretical model which combines open economy framework with the endogenous growth theory. In the model the terms of trade improvements increase demand for labour employed in exportable goods production at the expense of technology production (research and development – R&D) which leads to a shift of resources from knowledge development towards physical exportable goods. This reallocation has a negative impact on the TFP growth. Under a plausible calibration the model is able to replicate the observed empirical pattern.