Trade Integration and Growth
AbstractRecent empirical evidence suggests a negative relationship between trade integration and income per capita convergence. We show that moderate reductions in trade posts can generate sizable increases in income per capita divergence in a neoclassical two-country model of trade and growth. The welfare of both countries, however, rises with trade integration due to changes in their consumption time paths. Our setup sheds light on the striking nonlinear growth in the trade share of output since World War II: a linear fall in trade costs over time produces an exponential increase in the trade share of GDP. Concerning the empirical relationship between openness and technological progress, we perform an exercise that cautions against the use of aggregate production functions to obtain Solow residuals: two countries that reduce their trade costs and experience no technological progress are measured to have positive TFP growth rates if an aggregate production function is used for that purpose.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University in its series Working Papers with number 220.
Date of creation:
Date of revision:
Contact details of provider:
Postal: via Rontgen, 1 - 20136 Milano (Italy)
Web page: http://www.igier.unibocconi.it/
This paper has been announced in the following NEP Reports:
- NEP-ALL-2002-10-23 (All new papers)
- NEP-DEV-2002-10-23 (Development)
- NEP-DGE-2002-10-23 (Dynamic General Equilibrium)
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.:
- Jeffrey Sachs & Andrew Warner, 1995.
"Economic Reform and the Progress of Global Integration,"
Harvard Institute of Economic Research Working Papers
1733, Harvard - Institute of Economic Research.
- Jeffrey D. Sachs & Andrew Warner, 1995. "Economic Reform and the Process of Global Integration," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 26(1, 25th A), pages 1-118.
- Pritchett, Lant, 1995.
"Divergence, big time,"
Policy Research Working Paper Series
1522, The World Bank.
- Ben-David, Dan, 1996.
"Trade and convergence among countries,"
Journal of International Economics,
Elsevier, vol. 40(3-4), pages 279-298, May.
- Peter Klenow & Andrés Rodríguez-Clare, 1997. "The Neoclassical Revival in Growth Economics: Has It Gone Too Far?," NBER Chapters, in: NBER Macroeconomics Annual 1997, Volume 12, pages 73-114 National Bureau of Economic Research, Inc.
- Kevin H. O'Rourke & Jeffrey G. Williamson, 2000.
"When Did Globalization Begin?,"
NBER Working Papers
7632, National Bureau of Economic Research, Inc.
- Dornbusch, Rudiger & Fischer, Stanley & Samuelson, Paul A, 1980. "Heckscher- Ohlin Trade Theory with a Continuum of Goods," The Quarterly Journal of Economics, MIT Press, vol. 95(2), pages 203-24, September.
- Rivera-Batiz, Luis A & Romer, Paul M, 1991.
"Economic Integration and Endogenous Growth,"
The Quarterly Journal of Economics,
MIT Press, vol. 106(2), pages 531-55, May.
- Feenstra, R. & Markusen, J.R., 1991.
"Accounting for Growth with New Inputs,"
380, California Davis - Institute of Governmental Affairs.
- Krugman, Paul & Venables, Anthony J., 1995.
"Globalization and the Inequality of Nations,"
Working Paper Series
430, Research Institute of Industrial Economics.
- Paul Krugman & Anthony J. Venables, 1995. "Globalization and the Inequality of Nations," NBER Working Papers 5098, National Bureau of Economic Research, Inc.
- Krugman, Paul & Venables, Anthony J., 1994. "Globalization and the Inequality of Nations," CEPR Discussion Papers 1015, C.E.P.R. Discussion Papers.
- Raphael Bergoeing & Timothy J. Kehoe, .
"Trade Theory and Trade Facts,"
ILADES-Georgetown University Working Papers
inv129, Ilades-Georgetown University, Universidad Alberto Hurtado/School of Economics and Bussines.
- Francisco Rodriguez & Dani Rodrik, 1999. "Trade Policy and Economic Growth: A Skeptic's Guide to Cross-National Evidence," NBER Working Papers 7081, National Bureau of Economic Research, Inc.
- Markusen, James R, 1986. "Explaining the Volume of Trade: An Eclectic Approach," American Economic Review, American Economic Association, vol. 76(5), pages 1002-11, December.
- Cuñat, Alejandro & Maffezzoli, Marco, 2002.
"Neoclassical Growth and Commodity Trade,"
CEPR Discussion Papers
3322, C.E.P.R. Discussion Papers.
- John Romalis, 2004. "Factor Proportions and the Structure of Commodity Trade," American Economic Review, American Economic Association, vol. 94(1), pages 67-97, March.
- Andrew B. Bernard & J. Bradford Jensen & Peter K. Schott, 2002.
"Survival of the Best Fit: Competition from Low Wage Countries and the (Uneven) Growth of US Manufacturing Plants,"
Yale School of Management Working Papers
ysm299, Yale School of Management.
- Andrew B. Bernard & J. Bradford Jensen & Peter K. Schott, 2002. "Survival of the Best Fit: Competition from Low Wage Countries and the (Uneven) Growth of US Manufacturing Plants," NBER Working Papers 9170, National Bureau of Economic Research, Inc.
- Andrew B Bernard & J. Bradford Jensen & Peter K Schott, 2002. "Survival of the Best Fit: Competition from Low Wage Countries and the (Uneven) Growth of U.S. Manufacturing Plants," Working Papers 02-22, Center for Economic Studies, U.S. Census Bureau.
- Grossman, G.M. & Helpman, E., 1989.
"Endogenous Prduct Cycles,"
144, Princeton, Woodrow Wilson School - Public and International Affairs.
- Ventura, Jaume, 1997. "Growth and Interdependence," The Quarterly Journal of Economics, MIT Press, vol. 112(1), pages 57-84, February.
- Robert E. Hall & Charles I. Jones, 1999.
"Why Do Some Countries Produce So Much More Output per Worker than Others?,"
NBER Working Papers
6564, National Bureau of Economic Research, Inc.
- Robert E. Hall & Charles I. Jones, 1999. "Why Do Some Countries Produce So Much More Output Per Worker Than Others?," The Quarterly Journal of Economics, MIT Press, vol. 114(1), pages 83-116, February.
- Grossman, G.M. & Helpman, E., 1989.
"Endogemour Product Cycles,"
10-89, Tel Aviv.
- Barro, Robert J, 1999.
" Notes on Growth Accounting,"
Journal of Economic Growth,
Springer, vol. 4(2), pages 119-37, June.
- Richard Baldwin, 1989.
"Measureable Dynamic Gains from Trade,"
NBER Working Papers
3147, National Bureau of Economic Research, Inc.
- Ben-David, Dan, 1993. "Equalizing Exchange: Trade Liberalization and Income Convergence," The Quarterly Journal of Economics, MIT Press, vol. 108(3), pages 653-79, August.
- Stiglitz, Joseph E, 1970. "Factor Price Equalization in a Dynamic Economy," Journal of Political Economy, University of Chicago Press, vol. 78(3), pages 456-88, May-June.
- Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
- Galor, Oded & Mountford, Andrew, 2002. "Why are a Third of People Indian and Chinese? Trade, Industrialization and Demographic Transition," CEPR Discussion Papers 3136, C.E.P.R. Discussion Papers.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.