Productivity growth from an international trade perspective

This paper presents a framework to assess the relative importance of three key sources of productivity growth that international trade research focuses on: (1) inter-industry specialization; (2) intra-industry reallocation of resources across heterogeneous firms; and (3) technological progress. We illustrate how to apply the framework by deciphering the productivity dynamics of the Swiss manufacturing industry. We find that intra-industry reallocations are the most important source of growth in aggregate total factor productivity, spurred by the productivity growth of large, incumbent firms and the entry of new firms. Inter-industry specialization and general technological progress, nevertheless, remain important supplementary sources of productivity growth.