Trade Agreements, Bargaining and Economic Growth
AbstractRebelo's two-sector endogenous growth model is embedded within a two-country international trade framework. The two countries bargain over a trade agreement that specifies: (i) the size of the foreign aid that the richer country gives to the poorer one; (ii) the terms of the international trade that takes place after the aid is given. The aid is given not because of generosity, but because it improves the capital allocation across the world and thus raises total world production. This world production surplus enables the rich country to raise its equilibrium consumption and welfare beyond their no-aid levels. To ensure it, the rich country uses a trade agreement to condition the aid on favorable terms of trade.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 17064.
Date of creation: 30 Aug 2009
Date of revision:
International trade; Aid; Balanced Growth; Trade Agreement;
Other versions of this item:
- O41 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
- P45 - Economic Systems - - Other Economic Systems - - - International Linkages
- F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-09-05 (All new papers)
- NEP-DGE-2009-09-05 (Dynamic General Equilibrium)
- NEP-FDG-2009-09-05 (Financial Development & Growth)
- NEP-INT-2009-09-05 (International Trade)
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