Productivity gains from international trade in young and old economies

It is well established that international trade generates productivity gains within industries through the reallocation of inputs from less productive to more productive firms. Using European firm-level data from 2006 to 2014, we examine whether these productivity gains vary across economies with different average firm ages. Our results confirm that productivity gains from between-firm reallocation are larger in economies with greater exposure to international trade. Moreover, we find that these gains are approximately seven percent higher in economies in the bottom tertile of the firm–age distribution than in those in the top tertile. We show that this difference is driven by higher within-industry productivity dispersion in younger economies.