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Growth, Specialization, and Trade Liberalization

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Author Info
Michael Devereux

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Abstract

This paper examines a two-way interaction between trade liberalization and economic growth. Through dynamic increasing returns to specialization, international trade can increase world growth rates. But growth, through specialization , alters patterns of comparative advantage, changing the incentives to levy tariffs in a dynamic tariff game between governments. Two types of equilibria are analyzed. In one, average growth rates are low, tariffs are high and rising, the ratio of exports to income (the trade ratio) is low, and falls to zero asymptotically. In the other, growth rates are high, tariffs are low and falling, the trade ratio is higher, and rises over time. The conditions under which each type of equilibrium will be observed are investigated.

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Publisher Info
Paper provided by Queen's University, Department of Economics in its series Working Papers with number 786.

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Length: 39 pages
Date of creation: 1990
Date of revision:
Handle: RePEc:qed:wpaper:786

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Keywords: trade liberalization economic growth tariffs

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  1. Emily Blanchard, 2007. "Foreign Direct Investment, Endogenous Tariffs, and Preferential Trade Agreements," Advances in Economic Analysis & Policy, Berkeley Electronic Press, vol. 7(1), pages 1800-1800. [Downloadable!] (restricted)
  2. Kyle Bagwell & Robert W. Staiger, 2000. "GATT-Think," NBER Working Papers 8005, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
    • Kyle Bagwell & Robert W. Staiger, 2002. "GATT-think," Discussion Papers 0102-39, Columbia University, Department of Economics. [Downloadable!]
  3. Jun Ishii & Kei-Mu Yi, 1997. "The growth of world trade," Research Paper 9718, Federal Reserve Bank of New York. [Downloadable!]
  4. Ben Zissimos, 2006. "The GATT and Gradualism," Working Papers 0619, Department of Economics, Vanderbilt University. [Downloadable!]
    Other versions:
  5. Robert Staiger, 1994. "A Theory of Gradual Trade Liberalization," International Trade 9410003, EconWPA, revised 21 Oct 1994. [Downloadable!]
    Other versions:
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