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Trade Liberalization and Endogenous Growth: A q-Theory Approach

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Author Info
Baldwin, Richard
Forslid, Rikard

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Abstract

This paper has two purposes. It introduces a direct approach to policy analysis in endogenous growth models - the q-theory approach - and uses this to illustrate several new openness-and-growth links that appear when we enrich the economic content of the early trade and growth models. The approach - inspired by Tobin's q - is merely a change of state variables and re-interpretation of steady-state conditions. The main difference is its focus on investment, which is after all, the heart of growth models. The approach's simplicity permits us to complicate the early models in interesting directions and to explicitly include trade barriers. The latter allows study of incremental policy reform rather than mere shifts from autarky to free trade (or small deviations from free trade) as in the early literature.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 1397.

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Date of creation: May 1996
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Handle: RePEc:cpr:ceprdp:1397

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Related research
Keywords: Endogenous Growth Tobin's q Trade Liberalization

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Find related papers by JEL classification:
F10 - International Economics - - Trade - - - General
F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies
F15 - International Economics - - Trade - - - Economic Integration
O40 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
O41 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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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.:

  1. James A. Brander & Paul Krugman, 1983. "A 'Reciprocal Dumping' Model of International Trade," NBER Working Papers 1194, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  2. Smith, Alasdair & Venables, Anthony J., 1988. "Completing the Internal Market in the European Community: Some Industry Simulations," CEPR Discussion Papers 233, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  3. Feenstra, R.C., 1990. "Trade And Uneven Growth," Papers 353, California Davis - Institute of Governmental Affairs.
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  4. Segerstrom, Paul S & Anant, T C A & Dinopoulos, Elias, 1990. "A Schumpeterian Model of the Product Life Cycle," American Economic Review, American Economic Association, vol. 80(5), pages 1077-91, December. [Downloadable!] (restricted)
  5. Flam, Harry & Helpman, Elhanan, 1987. "Industrial policy under monopolistic competition," Journal of International Economics, Elsevier, vol. 22(1-2), pages 79-102, February. [Downloadable!] (restricted)
  6. Baldwin, Richard & Seghezza, Elena, 1996. "Trade-induced Investment-led Growth," CEPR Discussion Papers 1420, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  7. Baldwin, Richard E, 1992. "Measurable Dynamic Gains from Trade," Journal of Political Economy, University of Chicago Press, vol. 100(1), pages 162-74, February. [Downloadable!] (restricted)
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  8. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June. [Downloadable!] (restricted)
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  9. Richard E. Baldwin, 1992. "On the Growth Effects of Import Competition," NBER Working Papers 4045, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  10. Jong-Wha Lee, 1994. "Capital Goods Imports and Long-Run Growth," NBER Working Papers 4725, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  11. Rivera-Batiz, Luis A. & Romer, Paul M., 1991. "International trade with endogenous technological change," European Economic Review, Elsevier, vol. 35(4), pages 971-1001, May. [Downloadable!] (restricted)
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  12. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July. [Downloadable!] (restricted)
    Other versions:
Full references

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.)

  1. Gilles Duranton & Diego Puga, 2001. "Nursery Cities: Urban Diversity, Process Innovation, and the Life Cycle of Products," American Economic Review, American Economic Association, vol. 91(5), pages 1454-1477, December. [Downloadable!] (restricted)
    Other versions:
  2. Ivan Tchakarov & Selim Elekdag & Saade Chami, 2004. "What are the Potential Economic Benefits of Enlarging the Gulf Cooperation Council?," IMF Working Papers 04/152, International Monetary Fund. [Downloadable!]
  3. Richard E. Baldwin & Frédéric Robert-Nicoud, 2006. "Trade and Growth with Heterogeneous Firms," CEP Discussion Papers dp0727, Centre for Economic Performance, LSE. [Downloadable!]
    Other versions:
  4. Dinopoulos, Elias & Segerstrom, Paul, 2006. "North-South Trade and Economic Growth," CEPR Discussion Papers 5887, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  5. Baldwin, Richard E. & Martin, Philippe & Ottaviano, Gianmarco I.P., 1998. "Global Income Divergence, Trade and Industrialisation: The Geography of Growth Take-Offs," Working Paper Series 496, Research Institute of Industrial Economics. [Downloadable!]
    Other versions:
  6. Richard E. Baldwin & Rikard Forslid, 1999. "The Core-Periphery Model and Endogenous Growth: Stabilising and De-Stabilising Integration," NBER Working Papers 6899, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  7. Edgar Morgenroth, 2003. "What should Policy Makers Learn from Recent Advances in Growth Theory and New Economic Geography?," Papers WP150, Economic and Social Research Institute (ESRI). [Downloadable!]
  8. David Greenaway & Johan Torstensson, 1997. "Back to the future: Taking stock on intra-industry trade," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 133(2), pages 249-269, 06. [Downloadable!] (restricted)
    Other versions:
  9. Richard E. Baldwin & Elena Seghezza, 1996. "Trade-Induced Investment-led Growth," NBER Working Papers 5582, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  10. Fabio Cerina & Francesco Pigliaru, 2005. "Agglomeration and Growth in the NEG: a critical assessment," Working Paper CRENoS 200510, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia. [Downloadable!]
  11. Baldwin, Richard & Martin, Philippe, 2003. "Agglomeration and Regional Growth," CEPR Discussion Papers 3960, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  12. Lucas Bretschger & Thomas M. Steger, 2004. "The dynamics of economic integration : theory and policy," Economics working paper series 04/32, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich. [Downloadable!]
    Other versions:
  13. Richard E. Baldwin & Rikard Forslid, 1998. "Incremental Trade and Endogenous Growth: A q-Theory Approach," NBER Working Papers 6477, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  14. Steven Brakman & Harry Garretsen, 2003. "Rethinking the "New' Geographical Economics," Regional Studies, Taylor and Francis Journals, vol. 37(6-7), pages 637-648, August. [Downloadable!] (restricted)
  15. Bröcker, Johannes, 2004. "Agglomeration and Knowledge Diffusion," Economics working papers 2004,08, Christian-Albrechts-University of Kiel, Department of Economics. [Downloadable!]
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