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International convergence and local divergence

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  • Adolfo Cristobal-Campoamor

    ()
    (International School of Economics at Tbilisi State University)

Abstract

This 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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File URL: http://www.iset.ge/files/008-08.pdf
File Function: First version, 2008
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Bibliographic Info

Paper provided by International School of Economics at TSU, Tbilisi, Republic of Georgia in its series Working Papers with number 008-08.

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Length: 33 pages
Date of creation: Aug 2008
Date of revision:
Handle: RePEc:tbs:wpaper:08-008

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  10. Chun-Chung Au & J. Vernon Henderson, 2006. "Are Chinese Cities Too Small?," Review of Economic Studies, Oxford University Press, vol. 73(3), pages 549-576.
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