We develop and calibrate a model where di¤erences in factor en- dowments lead countries to trade di¤erent goods, so that the existence of international trade changes the sectorial composition of output from one country to another. Gains from trade re ect in total factor produc- tivity. We...

We study the impact of distortions in the investment goods sector on aggregate total factor productivity (TFP). We develop a two-sector neo- classical growth model in which TFP in the capital goods sector relative to TFP in the consumption sector is inversely related to the price of invest- ment...