This research group will provide a unique platform where academics and policy makers from a wide range of backgrounds can interact and discuss the most important issues in the subject. The workshops and research agendas will help policy makers become familiarized with the most recent academic developments in this area and it will also help academics interiorize what are the particular policy relevant issues today, particularly in Latin America. The end goal is to bridge the gap between academics and policy makers.

Misallocation and productivity. Recent research in macroeconomics has shown and documented that if resources are misallocated across firms in an economy, then this could lead to large differences in total factor productivity and GDP across countries. For instance, these studies find that if China and India where able to allocate resources across firms as the United States does then these country’s aggregate productivity could grow as much as 30%. How are the resources allocated across firms in Latin American countries? What are the productivity and output gains from reducing potential misallocations of resources? Are there any policies that governments can undertake to reduce potential frictions across firms? These are important issues that the Research Group will try to tackle. Doing so involves close interaction with local government and research institutions in order to obtain access to microdata that could be used to study this and other issues. As a side product of this agenda, the Research Group will create, and maintain, a unified data set of firm level production for Latin American countries. The Research Group will provide free access to this dataset to any researcher, research institution or student interested on using the data for research.

Trade policy and productivity gains. Recent research in the international trade literature has documented that firms that exporting firms are more productive, larger, and more profitable compared to firms that do not export. Guided by these findings, there is a large and growing literature in international trade focused on creating new quantitative models for trade policy evaluation with the goal of measuring how changes in trade policy can affect productivity. These models were recently used to analyze several important trade agreements in the world, like the North American Free Trade Agreement. However, little attention is given at quantifying the benefits of recent Latin American free trade agreements, like Venezuela joining Mercosur, Colombia and the United States, and more. Or trying to understand how the development of large trade areas in the world, like the Trans-Pacific Partnership or the Transatlantic Trade and Investment Partnership (USA-EU) could impact Latin American countries? One of the research interests of this Research Group is to develop new methods to quantify the productivity benefits of change in trade costs. Particular attention will be given to the quantification of the benefits for firms located in Latin America.

A workshop on “Firm Dynamics, Trade and Development” to be held in Montevideo, December 10-11 2014.

Ariel Burstein (UCLA), Lorenzo Caliendo (Yale) and Hugo Hopenhayn (UCLA).

Local Host Institution and Organizer
ORT, Nestor Gandelman.

The research group would like to organize a course on Models of heterogeneous agents in macro and recent developments in quantitative trade by Lorenzo Caliendo and Omar Licandro in December 2014 or March 2015.