International convergence and local divergence
AbstractThis paper presents an East-West endogenous-growth model that reproduces recent stylized facts applicable to the trade liberalization process of many developing countries: convergence with the rest of the world, higher internal divergence, increasing spatial concentration of economic activity and higher growth rates. We claim that the ongoing reduction of manufacturing trade costs may generate a net inflow of global demand towards the industrialized cores of developing countries. This will induce a reallocation of labor from traditional to modern sectors. In turn, such a sectoral shift may enlarge the catch-up (imitation) potential of developing countries and raise global growth rates, due to Grossman and Helpman's complementarity between imitative and innovative activities. Although advanced economies may become relatively worse off, the effect on growth rates may allow them to gain in absolute terms.
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Bibliographic InfoPaper provided by International School of Economics at TSU, Tbilisi, Republic of Georgia in its series Working Papers with number 008-08.
Length: 33 pages
Date of creation: Aug 2008
Date of revision:
Other versions of this item:
- R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
- F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
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