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Time preference, productivity, and the growth effects of integration

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  • Michael Frenkel

    (Georgetown University)

  • Thomas Trauth

    (University of Mainz Germany)

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    Abstract

    Traditional trade theory emphasizes static gains form trade, whereas the growing literature on endogenous growth is able to explain dynamic gains from trade, i.e., how trade influences economic growth. Empirical studies suggest that dynamic gains are likely to be significantly more important than static gains. More recently, a debate has evolved around the question: do welfare improving effects of trade still prevail when countries are "unequal" in some sense? This paper extends the discussion by investigating how differences in time preference rates and R&D productivity under alternative assumptions concerning knowledge diffusion affect the effect growth. We show that even when a developing country completely looses competitiveness in R&D, it experiences positive welfare improving effects with opening trade.

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    File URL: http://128.118.178.162/eps/it/papers/9607/9607001.pdf
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    Bibliographic Info

    Paper provided by EconWPA in its series International Trade with number 9607001.

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    Length: 25 pages
    Date of creation: 11 Jul 1996
    Date of revision:
    Handle: RePEc:wpa:wuwpit:9607001

    Note: Type of Document - WordPerfect ; prepared on IBM PC ; to print on HP ; pages: 25 ; figures: included .
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    Web page: http://128.118.178.162

    Related research

    Keywords: economic growth; international trade; economic integration;

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    References

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    1. Rivera-Batiz, Luis A & Romer, Paul M, 1991. "Economic Integration and Endogenous Growth," The Quarterly Journal of Economics, MIT Press, vol. 106(2), pages 531-55, May.
    2. Grossman, G.M. & Helpman, E., 1994. "Technology and Trade," Papers 175, Princeton, Woodrow Wilson School - Public and International Affairs.
    3. Paul M Romer, 1999. "Endogenous Technological Change," Levine's Working Paper Archive 2135, David K. Levine.
    4. Michael B. Devereux & Beverly J. Lapham, 1993. "The Stability of Economics Integration and Endogenous Growth," Working Papers 878, Queen's University, Department of Economics.
    5. Luis A. Rivera-Batiz & Paul M. Romer, 1991. "International Trade with Endogenous Technological Change," NBER Working Papers 3594, National Bureau of Economic Research, Inc.
    6. Gene M. Grossman & Elhanan Helpman, 1989. "Comparative Advantage and Long-Run Growth," NBER Working Papers 2809, National Bureau of Economic Research, Inc.
    7. Rivera-Batiz, Luis A. & Xie, Danyang, 1993. "Integration among unequals," Regional Science and Urban Economics, Elsevier, vol. 23(3), pages 337-354, July.
    8. Young, Alwyn, 1991. "Learning by Doing and the Dynamic Effects of International Trade," The Quarterly Journal of Economics, MIT Press, vol. 106(2), pages 369-405, May.
    9. Alwyn Young, 1991. "Learning by Doing and the Dynamic Effects of International Trade," NBER Working Papers 3577, National Bureau of Economic Research, Inc.
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