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Free Trade and Long-Run Growth

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  • Ben-David, Dan
  • Loewy, Michael B.

Abstract

What is the impact on output of movement towards free trade? Can trade liberalization have a permanent effect on output levels, and more importantly, does it have an impact on steady-state growth rates? The model developed here emphasizes the role that knowledge spillovers emanating from heightened trade can have on long-run growth rates. The model also facilitates an analysis of the dynamic behavior of income levels and terms of trade - as well as growth rates - during the transition between steady states. Among the results of the model, unilateral liberalization by one country generates a positive impact on the steady-state growth of all its partners while at the same time inducing a level effect on the liberalizing country that reduces the income gap between it and other, wealthier, countries. In some cases, the liberalizing country may even leapfrog over initially wealthier countries.

Suggested Citation

  • Ben-David, Dan & Loewy, Michael B., 1996. "Free Trade and Long-Run Growth," Foerder Institute for Economic Research Working Papers 275620, Tel-Aviv University > Foerder Institute for Economic Research.
    • Handle: RePEc:ags:isfiwp:275620
    DOI: 10.22004/ag.econ.275620
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    Cited by:

    1. Eaton, Jonathan & Kortum, Samuel, 1997. "Engines of growth: Domestic and foreign sources of innovation," Japan and the World Economy, Elsevier, vol. 9(2), pages 235-259, May.
    2. Kinoshita, Yuko, 2001. "R&D and Technology Spillovers through FDI: Innovation and Absorptive Capacity," CEPR Discussion Papers 2775, C.E.P.R. Discussion Papers.
    3. Das, Sanchita Basu & Narayanan, Badri, 2022. "ASEAN Education Cooperation: An Assessment of the Education Divide and Measuring the Potential Impact of Its Elimination," ADBI Working Papers 1300, Asian Development Bank Institute.
    4. Tudose Mihaela Brindusa & Cadiş Mihaela Narciza, 2013. "The Role Of Education In The Economic Development," Annals - Economy Series, Constantin Brancusi University, Faculty of Economics, vol. 4, pages 85-92, August.
    5. Ben-David, Dan & Papell, David H., 1995. "The great wars, the great crash, and steady state growth: Some new evidence about an old stylized fact," Journal of Monetary Economics, Elsevier, vol. 36(3), pages 453-475, December.
    6. Ozturk, Ilhan, 2001. "The role of education in economic development: a theoretical perspective," MPRA Paper 9023, University Library of Munich, Germany.
    7. Farhad Rassekh, 1998. "The Convergence Hypothesis: History, Theory, and Evidence," Open Economies Review, Springer, vol. 9(1), pages 85-105, January.
    8. Yuko Kinoshita, 2000. "R&D and Technology Spillovers via FDI: Innovation and Absorptive Capacity," William Davidson Institute Working Papers Series 349, William Davidson Institute at the University of Michigan.
    9. Alali, Walid Y., 2011. "The Contribution of Education to Economic Development," MPRA Paper 115614, University Library of Munich, Germany.
    10. Ben-David, Dan & Rahman, Atiqur, 1996. "Technological Convergence and International Trade," Foerder Institute for Economic Research Working Papers 275614, Tel-Aviv University > Foerder Institute for Economic Research.
    11. Jürgen Blazejczak (Hrsg.), 1998. "Zukunftsgestaltung ohne Wirtschaftswachstum?: Ergebnisse eines Workshops des DIW im Auftrag von Greenpeace Deutschland," Discussion Papers of DIW Berlin 168, DIW Berlin, German Institute for Economic Research.
    12. Maria-Simona NAROȘ & Mihaela SIMIONESCU, 2018. "The role of life-long education in achieving sustainable development," Institute for Economic Forecasting Conference Proceedings 180501, Institute for Economic Forecasting.
    13. Padoan, Pier Carlo, 1998. "Trade, knowledge accumulation and diffusion: A sectoral perspective1," Structural Change and Economic Dynamics, Elsevier, vol. 9(3), pages 349-372, September.
    14. Yuko Kinoshita, 2000. "R&D and technology spillovers via FDI: Innovation and absorptive capacity," CERGE-EI Working Papers wp163, The Center for Economic Research and Graduate Education - Economics Institute, Prague.
    15. Haukioja, Teemu & Hahl, Jarmo, 2001. "The Emergence of the New Economy, and its Challenge to Financial Intermediation and Banking," Discussion Papers 772, The Research Institute of the Finnish Economy.
    16. Padoan, Pier Carlo, 1996. "Trade and the accumulation and diffusion of knowledge," Policy Research Working Paper Series 1679, The World Bank.

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    More about this item

    Keywords

    Financial Economics; International Relations/Trade;

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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