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North-South Trades and Growth Miracles

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  • Seung Mo Choi

    (University of Chicago)

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    Abstract

    This paper proposes a two-country 'economic' model (in the sense that it contains utility and profit maximization motives), in which a low-income economy enjoys a high growth rate relative to a high-income economy, thanks to importing technologies (or 'machines') invented in the high- income economy. Following Romer (1990), the growth of an economy is sustained by increasing varieties of inputs; while a high-income economy (and a closed economy) should invest in R&D to invent new inputs (or 'machines'), an open, low-income economy may trade with the high-income economy to import them, which reduces the cost of productivity advances. The model can generate the growth paths of the U.S. and the South Korea.

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    Bibliographic Info

    Paper provided by EconWPA in its series GE, Growth, Math methods with number 0507013.

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    Date of creation: 26 Jul 2005
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    Handle: RePEc:wpa:wuwpge:0507013

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    Keywords: International Trade; Technological Progress; Growth;

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    1. Romer, Paul M, 1990. "Endogenous Technological Change," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages S71-102, October.
    2. Chuang, Yih-Chyi, 1998. "Learning by Doing, the Technology Gap, and Growth," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(3), pages 697-721, August.
    3. David T. Coe & Elhanan Helpman & Alexander Hoffmaister, 1995. "North-South R&D Spillovers," NBER Working Papers 5048, National Bureau of Economic Research, Inc.
    4. Fernando Alvarez & Robert E. Lucas, 2005. "General Equilibrium Analysis of the Eaton-Kortum Model of International Trade," NBER Working Papers 11764, National Bureau of Economic Research, Inc.
    5. Romain Wacziarg & Karen Horn Welch, 2008. "Trade Liberalization and Growth: New Evidence," World Bank Economic Review, World Bank Group, vol. 22(2), pages 187-231, June.
    6. Francisco Alcalá & Antonio Ciccone, 2003. "Trade and Productivity," Working Papers 12, Barcelona Graduate School of Economics.
    7. Jeffrey D. Sachs & Andrew Warner, 1995. "Economic Reform and the Process of Global Integration," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 26(1, 25th A), pages 1-118.
    8. Eaton, Jonathan & Kortum, Samuel, 1996. "Trade in ideas Patenting and productivity in the OECD," Journal of International Economics, Elsevier, vol. 40(3-4), pages 251-278, May.
    9. Wolfgang Keller, 2004. "International Technology Diffusion," Journal of Economic Literature, American Economic Association, vol. 42(3), pages 752-782, September.
    10. David H. Romer & Jeffrey A. Frankel, 1999. "Does Trade Cause Growth?," American Economic Review, American Economic Association, vol. 89(3), pages 379-399, June.
    11. Aghion, Philippe & Howitt, Peter, 1992. "A Model of Growth through Creative Destruction," Econometrica, Econometric Society, vol. 60(2), pages 323-51, March.
    12. Eaton, Jonathan & Kortum, Samuel, 1999. "International Technology Diffusion: Theory and Measurement," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 40(3), pages 537-70, August.
    13. Klenow, Peter J. & Rodriguez-Clare, Andres, 2005. "Externalities and Growth," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 11, pages 817-861 Elsevier.
    14. Robert E. Lucas, 2000. "Some Macroeconomics for the 21st Century," Journal of Economic Perspectives, American Economic Association, vol. 14(1), pages 159-168, Winter.
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