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Abstract

How does openness affect economic development? This question is answered in the context of a dynamic general equilibrium model of the world economy, where countries have technological differences that are both sector neutral and specific to the investment goods sector. Relative to a benchmark case of trade in credit markets only, consider (i) a complete restriction of trade and (ii) a full liberalization of trade. The first change decreases the cross-sectional dispersion of incomes only slightly, and produces a relatively small welfare loss. The second change, instead, decreases dispersion by a significant amount, and produces a very large welfare gain. Copyright 2006 by the Economics Department Of The University Of Pennsylvania And Osaka University Institute Of Social And Economic Research Association.

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File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1468-2354.2006.00391.x
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Bibliographic 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): 47 (2006)
Issue (Month): 2 (05)
Pages: 611-649

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Handle: RePEc:ier:iecrev:v:47:y:2006:i:2:p:611-649

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Find related papers by JEL classification:

• E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
• F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
• O11 - Economic Development, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
• O30 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - General

References

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Cited by:

1. Jonathan Eaton & Samuel Kortum, 2004. "Trade in Capital Goods," Levine's Working Paper Archive 228400000000000019, David K. Levine.
   
   • Eaton, Jonathan & Kortum, Samuel, 2001. "Trade in capital goods," European Economic Review, Elsevier, vol. 45(7), pages 1195-1235.
   • Jonathan Eaton & Samuel Kortum, 2000. "Trade in Capital Goods," Boston University - Department of Economics - The Institute for Economic Development Working Papers Series dp-109, Boston University - Department of Economics.
   • Jonathan Eaton & Samuel Kortum, 2001. "Trade in Capital Goods," NBER Working Papers 8070, National Bureau of Economic Research, Inc.

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