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Trade, Growth, and Technology Equalization

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  • John J. Seater

Abstract

Trade is shown to increase economic growth purely through comparative advantage without recourse to scale effects, technology transfer, research and development, or even international investment. The resulting growth rates are those that would result from technology transfer, even though no technology transfer actually occurs. A balanced growth rate exists, is identical for all countries and therefore the world, and is asymptotically stable if and only if each country has an absolute (not just comparative) advantage in something. When balanced growth does not exist, trade reduces but does not eliminate differences between countries’ growth rates. Trade therefore does not necessarily guarantee a stable world income distribution. The magnitude of trade's effect on growth depends on the goods imported, not those exported.

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Bibliographic Info

Paper provided by DEGIT, Dynamics, Economic Growth, and International Trade in its series DEGIT Conference Papers with number c010_008.

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Length: 42 pages
Date of creation: Jun 2005
Date of revision:
Handle: RePEc:deg:conpap:c010_008

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Keywords: trade; growth; technology equalization; comparative advantage; absolute advantage; world income distribution;

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  1. Gene M. Grossman & Elhanan Helpman, 1989. "Comparative Advantage and Long-Run Growth," NBER Working Papers 2809, National Bureau of Economic Research, Inc.
  2. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 1002-37, October.
  3. Backus, David K. & Kehoe, Patrick J. & Kehoe, Timothy J., 1992. "In search of scale effects in trade and growth," Journal of Economic Theory, Elsevier, vol. 58(2), pages 377-409, December.
  4. Francesco Caselli & Nicola Gennaioli, 2006. "Dynastic management," LSE Research Online Documents on Economics 3558, London School of Economics and Political Science, LSE Library.
  5. Peretto, P. & Smulders, J.A., 2002. "Technological distance, growth and scale effects," Open Access publications from Tilburg University urn:nbn:nl:ui:12-89730, Tilburg University.
  6. Jones, Larry E & Manuelli, Rodolfo E, 1990. "A Convex Model of Equilibrium Growth: Theory and Policy Implications," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 1008-38, October.
  7. Luis A. Rivera-Batiz & Paul M. Romer, 1990. "Economic Integration and Endogenous Growth," NBER Working Papers 3528, National Bureau of Economic Research, Inc.
  8. Oded_Galor & Andrew Mountford, 2006. "Trade and the Great Divergence: The Family Connection," Working Papers 2006-01, Brown University, Department of Economics.
  9. Young, Alwyn, 1991. "Learning by Doing and the Dynamic Effects of International Trade," The Quarterly Journal of Economics, MIT Press, vol. 106(2), pages 369-405, May.
  10. Alwyn Young, 1991. "Learning by Doing and the Dynamic Effects of International Trade," NBER Working Papers 3577, National Bureau of Economic Research, Inc.
  11. Ronald W. Jones, 2000. "Globalization and the Theory of Input Trade," MIT Press Books, The MIT Press, edition 1, volume 1, number 026210086x, December.
  12. Peter Howitt, 2000. "Endogenous Growth and Cross-Country Income Differences," American Economic Review, American Economic Association, vol. 90(4), pages 829-846, September.
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