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A lab-equipment model of growth with heterogeneous firms and asymmetric countries

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  • Takumi Naito

    (Vanderbilt University and Waseda University)

Abstract

To examine the effects of asymmetric trade liberalization on countries' long-run growth and welfare through intraindustry reallocations, we extend the Rivera-Batiz--Romer lab-equipment model of growth with expanding input varieties to include both heterogeneous firms and asymmetric countries. We first derive extended ACR (Arkolakis--Costinot--Rodriguez-Clare) formulas for long-run growth and welfare changes even with asymmetric countries. In our baseline calculation, the total long-run welfare effect of greater openness (expressed in flow terms) is about four times as large as the static counterpart. Finally, we show that even unilateral trade liberalization always raises both countries' long-run growth and welfare.

Suggested Citation

  • Takumi Naito, 2018. "A lab-equipment model of growth with heterogeneous firms and asymmetric countries," Vanderbilt University Department of Economics Working Papers 18-00009, Vanderbilt University Department of Economics.
    • Handle: RePEc:van:wpaper:vuecon-sub-18-00009
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    References listed on IDEAS

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    Cited by:

    1. Takumi Naito, 2021. "Can The Optimal Tariff Be Zero For A Growing Large Country?," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 62(3), pages 1237-1280, August.

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    JEL classification:

    • F1 - International Economics - - Trade

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