Growth, Specialization, and Trade Liberalization

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Growth, Specialization, and Trade Liberalization

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Devereux, Michael B

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Michael B. Devereux

Abstract

This paper examines a two-way interaction between trade liberalization and economic growth. Through increasing returns to specialization, international trade can increase world growth rates. But growth alters patterns of comparative advantage, changing the incentives to levy tariffs in a dynamic tariff game between governments. Two types of equilibria are analyzed. In a tariff war equilibrium, growth rates are low, tariffs are high and rising, and the ratio of exports to income, the trade ratio, is low and falls to zero asymptotically. In a trade liberalization equilibrium, growth rates are high, tariffs are low and falling, and the trade ratio is higher and is increasing over time. Copyright 1997 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

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Publisher Info
Article provided by Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association in its journal International Economic Review.

Volume (Year): 38 (1997)
Issue (Month): 3 (August)
Pages: 565-85
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Handle: RePEc:ier:iecrev:v:38:y:1997:i:3:p:565-85

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Paper
- Michael Devereux, 1990. "Growth, Specialization, and Trade Liberalization," Working Papers 786, Queen's University, Department of Economics.

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

Kyle Bagwell, 2009. "Self-Enforcing Trade Agreements and Private Information," NBER Working Papers 14812, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
Ben Zissimos, 2006. "The GATT and Gradualism," Working Papers 0619, Department of Economics, Vanderbilt University. [Downloadable!]
Other versions:
- Ben Zissimos & Ben Lockwood, 2004. "The GATT and Gradualism," Econometric Society 2004 North American Summer Meetings 607, Econometric Society. [Downloadable!]
- Zissimos, Ben, 2007. "The GATT and gradualism," Journal of International Economics, Elsevier, vol. 71(2), pages 410-433, April. [Downloadable!] (restricted)
repec:bep:eapadv:v:7:y:2007:i:1:p:1800-1800 is not listed on IDEAS
Carsten Kowalczyk & Raymond Riezman, 2009. "Trade Agreements," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
Robert Staiger, 1994. "A Theory of Gradual Trade Liberalization," International Trade 9410003, EconWPA, revised 21 Oct 1994. [Downloadable!]
Other versions:
- Robert W. Staiger, 1994. "A Theory of Gradual Trade Liberalization," NBER Working Papers 4620, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
Kyle Bagwell & Robert W. Staiger, 2000. "GATT-Think," NBER Working Papers 8005, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
Other versions:
- Kyle Bagwell & Robert W. Staiger, 2002. "GATT-think," Discussion Papers 0102-39, Columbia University, Department of Economics. [Downloadable!]
Jun Ishii & Kei-Mu Yi, 1997. "The growth of world trade," Research Paper 9718, Federal Reserve Bank of New York. [Downloadable!]
Richard Chisik & Ronald B. Davies, 2001. "Gradualism in Tax Treaties with Irreversible Foreign Direct Investment," Working Papers 0201, Florida International University, Department of Economics. [Downloadable!]
Other versions:
- Richard Chisik & Ronald B. Davies, 2000. "Gradualism in Tax Treaties with Irreversible Foreign Direct Investment," University of Oregon Economics Department Working Papers 2000-3, University of Oregon Economics Department, revised 01 Jun 2002. [Downloadable!]
- Richard Chisik & Ronald B. Davies, 2004. "Gradualism In Tax Treaties With Irreversible Foreign Direct Investment," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 45(1), pages 113-139, 02. [Downloadable!] (restricted)
Maoz, Yishay & Peled, Dan & Sarid, Assaf, 2009. "Trade Agreements, Bargaining and Economic Growth," MPRA Paper 17064, University Library of Munich, Germany. [Downloadable!]

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