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Trade-induced Investment-led Growth

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Author Info
Baldwin, Richard
Seghezza, Elena

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Abstract

This paper presents five theoretical openness-and-growth links that can account for trade-induced investment-led growth. The links are all demonstrated with neoclassical growth models developed in the context of trade models that allow for imperfect competition and scale economies. This sort of old-growth-theory-in-a-new-trade model has not been thoroughly explored in the literature since the profession skipped from old-growth-old-trade models straight to new-growth-new-trade models. Nonetheless, such models are necessary to explain several key aspects of the econometric evidence on trade and growth. For example, cross-country data suggests that openness influences growth only via its effect on investment, and suggests that openness promotes investment in all countries whatever the capital-intensiveness of their exports (contrary to predictions of the old-growth-old-trade models).

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 1420.

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Date of creation: Jun 1996
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Handle: RePEc:cpr:ceprdp:1420

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Related research
Keywords: Neoclassical Growth; Trade-induced Investment-led Growth; Trade and Growth;

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Find related papers by JEL classification:
F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies
F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies

References listed on IDEAS
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)
    Other versions:
  2. Baldwin, Richard & Seghezza, Elena, 1996. "Trade-induced Investment-led Growth," CEPR Discussion Papers 1420, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  3. Baldwin, Richard & Forslid, Rikard, 1996. "Trade Liberalization and Endogenous Growth: A q-Theory Approach," CEPR Discussion Papers 1397, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  4. Richard E. Baldwin, 1992. "On the Growth Effects of Import Competition," NBER Working Papers 4045, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  5. Joseph F. Francois, 1995. "Dynamic Effects Of Trade In Financial Services," International Economic Journal, Korean International Economic Association, vol. 9(3), pages 1-14, October. [Downloadable!] (restricted)
  6. 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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  7. Robert J. Barro, 1991. "Economic Growth in a Cross Section of Countries," NBER Working Papers 3120, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  8. Mankiw, N Gregory & Romer, David & Weil, David N, 1992. "A Contribution to the Empirics of Economic Growth," The Quarterly Journal of Economics, MIT Press, vol. 107(2), pages 407-37, May. [Downloadable!] (restricted)
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  9. Jones, Charles I, 1995. "Time Series Tests of Endogenous Growth Models," The Quarterly Journal of Economics, MIT Press, vol. 110(2), pages 495-525, May. [Downloadable!] (restricted)
  10. Levine, Ross & Renelt, David, 1992. "A Sensitivity Analysis of Cross-Country Growth Regressions," American Economic Review, American Economic Association, vol. 82(4), pages 942-63, September. [Downloadable!] (restricted)
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  11. De Long, J Bradford & Summers, Lawrence H, 1991. "Equipment Investment and Economic Growth," The Quarterly Journal of Economics, MIT Press, vol. 106(2), pages 445-502, May. [Downloadable!] (restricted)
    Other versions:
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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. Richard E. Baldwin & Rikard Forslid, 1996. "Trade Liberalization and Endogenous Growth: A q-Theory Approach," NBER Working Papers 5549, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  2. 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:
  3. Kari E.O. Alho & Ville Kaitila & Mika Widgrén, 2008. "Offshoring, Relocation and the Speed of Convergence in the Enlarged European Union," Discussion Papers 1156, The Research Institute of the Finnish Economy. [Downloadable!]
    Other versions:
  4. Aurora A.C. Teixeira & Natércia Fortuna, 2006. "Human capital, trade and long-run productivity. Testing the technological absorption hypothesis for the Portuguese economy, 1960-2001," FEP Working Papers 226, Universidade do Porto, Faculdade de Economia do Porto. [Downloadable!]
  5. Kari E.O. Alho & Ville Kaitila & Mika Widgrén, 2004. "Speed of Convergence and Relocation: New EU Member Countries Catching up with the Old," Discussion Papers 963, The Research Institute of the Finnish Economy. [Downloadable!]
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  6. OLIVIER, Jacques & GOH, Ai-Ting, 2001. "Free trade and protection of intellectual property rights : can we have one without the other?," Les Cahiers de Recherche 730, HEC Paris. [Downloadable!]
  7. Hildegunn Ekroll Stokke & Jørn Rattsø & Xinshen Diao, 2001. "Learning by Exporting and Productivity-investment Interaction: An Intertemporal General Equilibrium Analysis of the Growth Process in Thailand," Working Paper Series 2302, Department of Economics, Norwegian University of Science and Technology. [Downloadable!]
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  8. Das, Gouranga Gopal & Andriamananjara, Soamiely, 2004. "Hub-and-Spokes Free-Trade-Agreements in the Presence of Technology Spillovers: An Application to the Western Hemisphere," Working Papers 15870, United States International Trade Commission, Office of Economics. [Downloadable!]
  9. Goh, Ai Ting & Olivier, Jacques, 2002. "Free Trade and Protection of Intellectual Property Rights: Can We Have One Without the Other?," CEPR Discussion Papers 3127, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  10. Baldwin, Richard E. & Seghezza, Elena, 1996. "The New Growth Theory: Its Logic and Trade Policy Implications," 1996: Implications of the New Growth Theory to Agricultural Trade Research and Trade Policy Conference, December 1996, Washington DC 50862, International Agricultural Trade Research Consortium. [Downloadable!]
  11. Pablo Astorga, 2009. "A Century of Economic Growth in Latin America," Oxford University Economic and Social History Series _075, Economics Group, Nuffield College, University of Oxford. [Downloadable!]
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