Neoclassical Growth, Manufacturing Agglomeration and Terms of Trade
AbstractThis paper presents an integrated view of economic growth, development traps, and economic geography. We explain why there is income convergence among some countries (neoclassical regime) and income divergence among others (poverty trap regime). Income convergence (divergence) and manufacturing industry diffusion (agglomeration) are re-enforcing each other in a cumulative process. Moreover, trade openness may trigger a catch-up process of an economy that is stuck in a \"poverty trap\". This catch-up is characterized by an increase in the investment-to-GDP ratio and an improvement of the terms of trade. A new dynamic welfare gain of trade liberalization is identified, which is likely to be large.
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Bibliographic InfoPaper provided by Centro Studi Luca d\'Agliano, University of Milano in its series Development Working Papers with number 136.
Date of creation: 01 Mar 2000
Date of revision:
agglomeration; complementarities; convergence; dynamic trade theory; dynamic welfare gains of trade; poverty trap; terms of trade; trade liberalization;
Other versions of this item:
- Dieter M. Urban, 2007. "Neoclassical Growth, Manufacturing Agglomeration, and Terms of Trade," Review of International Economics, Wiley Blackwell, vol. 15(5), pages 1014-1035, November.
- Urban, Dieter M., 1998. "Neoclassical growth, manufacturing agglomeration, and terms of trade," Working Papers 16-1998, Copenhagen Business School, Department of Economics.
- F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
- O41 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
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- Straubhaar, Thomas & Suhrcke, Marc & Urban, Dieter M., 2002.
"Divergence - is it geography?,"
HWWA Discussion Papers
181, Hamburg Institute of International Economics (HWWA).
- Baldwin, Richard & Martin, Philippe, 2003.
"Agglomeration and Regional Growth,"
CEPR Discussion Papers
3960, C.E.P.R. Discussion Papers.
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