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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. Caselli, Francesco & Gennaioli, Nicola, 2003. "Dynastic Management," CEPR Discussion Papers 3767, C.E.P.R. Discussion Papers.
  2. Peter Howitt, 2000. "Endogenous Growth and Cross-Country Income Differences," American Economic Review, American Economic Association, vol. 90(4), pages 829-846, September.
  3. Galor, Oded & Mountford, Andrew, 2006. "Trade and the Great Divergence: The Family Connection," CEPR Discussion Papers 5490, C.E.P.R. Discussion Papers.
  4. Ronald W. Jones, 2000. "Globalization and the Theory of Input Trade," MIT Press Books, The MIT Press, edition 1, volume 1, number 026210086x, December.
  5. Paul M Romer, 1999. "Increasing Returns and Long-Run Growth," Levine's Working Paper Archive 2232, David K. Levine.
  6. Grossman, G.M. & Helpman, E., 1988. "Comparative Advantage And Long-Run Growth," Papers 39-88, Tel Aviv.
  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. Alwyn Young, 1991. "Learning by Doing and the Dynamic Effects of International Trade," NBER Working Papers 3577, National Bureau of Economic Research, Inc.
  9. David K. Backus & Patrick J. Kehoe & Timothy J. Kehoe, 1992. "In search of scale effects in trade and growth," Staff Report 152, Federal Reserve Bank of Minneapolis.
  10. 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.
  11. 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.
  12. Pietro Peretto & Sjak Smulders, 2002. "Technological Distance, Growth And Scale Effects," Economic Journal, Royal Economic Society, vol. 112(481), pages 603-624, July.
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