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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 Centre interuniversitaire de recherche en économie quantitative, CIREQ in its series Cahiers de recherche with number 01-2005.

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Length: 42 pages
Date of creation: 2005
Date of revision:
Handle: RePEc:mtl:montec:01-2005

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Keywords: economic development; international trade; investment-specific technology; quantitative dynamic general equilibrium; incomplete markets;

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References

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Cited by:
  1. Jonathan Eaton & Samuel Kortum, 2004. "Trade in Capital Goods," Levine's Working Paper Archive 228400000000000019, David K. Levine.

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