countries engage in asymmetric trade. We obtain explicit links between persistent gaps in productivity growth and the incentives … subsidize hinges on slower productivity growth and is disconnected from the importers' incentive to tax resource inflows i ….e., rent extraction. Moreover, faster productivity growth exacerbates the im- porters' incentive to tax, beyond the rent …

We estimate the relationship between productivity and trade for a panel of countries over the period 1980 to 2000 using … instrumental-variables estimation of a productivity equation. We note that some estimates of productivity gains attributed to trade … productivity. The trade instrument is based on a "theoretically motivated' gravity equation. The instruments for institutional …