Trade Liberalization and Heterogeneous Rates of Time Preference across Countries: A Possibility of Trade Deficits with China
AbstractStrategies for trade liberalization when the rates of time preference are heterogeneous across countries are examined in the framework of endogenous growth. The paper argues that the best strategy for a country with the relatively higher rate of time preference is the strategy of free trade with wielding market power if the country is large enough to wield market power because all the optimality conditions are satisfied in this case. By this strategy, the current account of the country shows persisting surpluses, which implies a possibility that China has taken this strategy.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 19386.
Date of creation: 16 Dec 2009
Date of revision:
Trade Liberalization; Time preference; Heterogeneity; Trade deficits; China;
Find related papers by JEL classification:
- F10 - International Economics - - Trade - - - General
- O24 - Economic Development, Technological Change, and Growth - - Development Planning and Policy - - - Trade Policy; Factor Movement; Foreign Exchange Policy
- F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
- F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
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