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A Ricardian model of trade and growth with endogenous trade status

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  • Naito, Takumi

Abstract

We formulate a two-country, continuum-good Ricardian model of trade and endogenous growth with endogenous trade status. After establishing the existence, uniqueness, and global stability of a balanced growth path, we show that, compared with the old balanced growth path, a permanent fall in the trade cost in any one country: (i) raises the growth rates of capital in all countries for all periods; (ii) increases both the range of the imported varieties and that of the exported varieties in all countries for all periods; and (iii) raises welfare in all countries. Our theoretical predictions are qualitatively consistent with the empirical evidence.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of International Economics.

Volume (Year): 87 (2012)
Issue (Month): 1 ()
Pages: 80-88

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Handle: RePEc:eee:inecon:v:87:y:2012:i:1:p:80-88

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Web page: http://www.elsevier.com/locate/inca/505552

Related research

Keywords: Ricardian model; Endogenous growth; Endogenous trade status; Unilateral trade liberalization; Terms of trade;

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  1. Gustafsson, Peter & Segerstrom, Paul, 2006. "Trade Liberalization and Productivity Growth," CEPR Discussion Papers 5894, C.E.P.R. Discussion Papers.
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Cited by:
  1. NAITO Takumi, 2012. "An Eaton-Kortum Model of Trade and Growth," Discussion papers 12055, Research Institute of Economy, Trade and Industry (RIETI).
  2. Wolf-Heimo Grieben & Fuat Sener, 2012. "North-South Trade, Unemployment and Growth: What’s the Role of Labor Unions?," Working Paper Series of the Department of Economics, University of Konstanz 2012-06, Department of Economics, University of Konstanz.

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