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Economic Development under Alternative Trade Regimes

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  • CASTRO, Rui

Abstract

How does openness affect economic development? This question is answered in the context of a dynamic general equilibrium model of the world economy, where countries have technological differences that are both sector-neutral and specific to the investment goods sector. Relative to a benchmark case of trade in credit markets only, consider (i) a complete restriction of trade, and (ii) a full liberalization of trade. The first change decreases the cross-sectional dispersion of incomes only slightly, and produces a relatively small welfare loss. The second change, instead, decreases dispersion by a significant amount, and produces a very large welfare gain.

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Bibliographic Info

Paper provided by Universite de Montreal, Departement de sciences economiques in its series Cahiers de recherche with number 2005-02.

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Length: 39 pages
Date of creation: 2005
Date of revision:
Handle: RePEc:mtl:montde:2005-02

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Keywords: Economic Develoent; International Trade; Investment-Scific Technology; Quantitative Dynamic General Equilibrium; Incomete Markets.;

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Cited by:
  1. Eaton, Jonathan & Kortum, Samuel, 2001. "Trade in capital goods," European Economic Review, Elsevier, vol. 45(7), pages 1195-1235.

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