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A Rationale for Infant‐Industry Protection and Gradual Trade Liberalization

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  • Takumi Naito

Abstract

A two‐final‐good, one‐primary‐factor, small–open endogenous growth model is constructed based on R&D. The model yields two steady states with different growth rates as potential equilibria. Depending on history and the external environment, the economy may fall into the poverty trap in free trade. However, a temporary trade policy can release the economy from the poverty trap. Moreover, the optimal trade policy is gradual trade liberalization with the rate of protection kept to a minimum.

Suggested Citation

  • Takumi Naito, 2000. "A Rationale for Infant‐Industry Protection and Gradual Trade Liberalization," Review of Development Economics, Wiley Blackwell, vol. 4(2), pages 164-174, June.
  • Handle: RePEc:bla:rdevec:v:4:y:2000:i:2:p:164-174
    DOI: 10.1111/1467-9361.00085
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    Cited by:

    1. Miguel Urrutia & Carlos Esteban Posada & Adriana Pontón & Oscar Martínez, 2000. "Comercio Exterior y Actividad Económica de Colombia en el Siglo XX: Exportaciones Totales y Tradicionales," Borradores de Economia 163, Banco de la Republica de Colombia.

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