Economist (EP)

International Monetary Fund

Asia and Pacific Department

E-mail: csandoz(-at-) imf.org

Research interests: Macroeconomics, International Economics, Trade and Firms' organization.

Productivity, Misallocation and Trade (with Antoine Berthou, Jong Hyun Chung and Kalina Manova)

July 2019 [NEW VERSION]

This paper investigates the relationship between trade, allocative efficiency and aggregate productivity, using unique data collected by the Competitiveness Research Network (CompNet) for 16 European countries and 20 manufacturing industries over the 1998-2011 period. The key feature of this data is that it allows decomposing the sector-level productivity of labor into an average productivity term and the contribution of the allocation of production factors across firms (allocative efficiency), which we relate to trade patterns measured at the country-sector level. In our empirical strategy, we use a two-stage least squares estimator to address the endogeneity problem between trade and productivity, where country-sector exports and imports are explained in a first-stage equation by the foreign demand and supply capacity of the trade partners. We find strong evidence that growth in foreign export demand, import competition and imported-input supply significantly increase aggregate labor productivity. While export demand operates by improving both the average productivity of firms as well as the allocative efficiency of production factors within each country and sector, the benefits from import penetration are mostly mediated by within-firm productivity upgrading. Finally, we further document how financial and labor market frictions can affect productivity growth through the efficiency of resource allocation across firms.

September 2018

Productivity is the fundamental engine of economic growth. The literature has shown that a large part of productivity loss is due to resource misallocation. However, few studies have introduced traded intermediate inputs in their frameworks. I provide new evidence that decreasing prices of imported intermediate inputs foster aggregate productivity growth by improving resource allocative efficiency. I estimate a structural model with heterogeneous importers using a comprehensive dataset of French firms in manufacturing industries. I then implement a TFP decomposition to quantify the contribution of allocative efficiency in France between 1999 and 2012. One percentage point increase of sourcing goods from China rises annual French TFP growth by 0.2 percentage point. Allocative efficiency explains all aggregate TFP gains from increasing sourcing of cheaper intermediate goods in China.