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Trade Liberalization and Heterogeneous Rates of Time Preference across Countries: A Possibility of Trade Deficits with China

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  • Harashima, Taiji

Abstract

Strategies 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 Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 19386.

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Date of creation: 16 Dec 2009
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Handle: RePEc:pra:mprapa:19386

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Keywords: Trade Liberalization; Time preference; Heterogeneity; Trade deficits; China;

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  1. Farmer, Roger E.A. & Lahiri, Amartya, 2005. "Recursive preferences and balanced growth," Journal of Economic Theory, Elsevier, vol. 125(1), pages 61-77, November.
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  7. Becker, Robert A, 1980. "On the Long-Run Steady State in a Simple Dynamic Model of Equilibrium with Heterogeneous Households," The Quarterly Journal of Economics, MIT Press, vol. 95(2), pages 375-82, September.
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  9. Dollar, David & Kraay, Aart, 2001. "Trade, growth, and poverty," Policy Research Working Paper Series 2615, The World Bank.
  10. Jones, Charles I, 1995. "R&D-Based Models of Economic Growth," Journal of Political Economy, University of Chicago Press, vol. 103(4), pages 759-84, August.
  11. Lawrance, Emily C, 1991. "Poverty and the Rate of Time Preference: Evidence from Panel Data," Journal of Political Economy, University of Chicago Press, vol. 99(1), pages 54-77, February.
  12. L Alan Winters, 2004. "Trade Liberalisation and Economic Performance: An Overview," Economic Journal, Royal Economic Society, vol. 114(493), pages F4-F21, 02.
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Cited by:
  1. Harashima, Taiji, 2012. "Sustainable Heterogeneity as the Unique Socially Optimal Allocation for Almost All Social Welfare Functions," MPRA Paper 40938, University Library of Munich, Germany.
  2. Harashima, Taiji, 2013. "Sustainable Heterogeneity in Exogenous Growth Models: The Socially Optimal Distribution by Government’s Intervention," MPRA Paper 51653, University Library of Munich, Germany.

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