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Complementarity, growth, and trade

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  • Seppo Honkapohja
  • Arja Turunen-Red

Abstract

We consider an endogenous growth model with international trade in complementary capital goods. The model possesses several distinct, balanced growth solutions, which we classify using stability under adaptive learning. Some of the equilibria can involve growth rates much higher than others. We show that, in addition to a small (usually positive) effect on a given equilibrium, an expansion in trade may sometimes yield a much larger, sudden jump in growth. The small effect on the initial equilibrium may reduce growth if the opportunity cost of capital rises very fast as growth accelerates.

Suggested Citation

  • Seppo Honkapohja & Arja Turunen-Red, 2002. "Complementarity, growth, and trade," Canadian Journal of Economics, Canadian Economics Association, vol. 35(3), pages 495-516, August.
  • Handle: RePEc:cje:issued:v:35:y:2002:i:3:p:495-516
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    Cited by:

    1. Christine Mutz & Thomas Ziesemer, 2008. "Simultaneous estimation of income and price elasticities of export demand, scale economies and total factor productivity growth for Brazil," Applied Economics, Taylor & Francis Journals, vol. 40(22), pages 2921-2937.
    2. Seppo Honkapohja & Arja H. Turunen-Red & Alan D. Woodland, 2016. "Growth, expectations and tariffs," Canadian Journal of Economics, Canadian Economics Association, vol. 49(4), pages 1441-1469, November.
    3. Honkapohja, Seppo & Turunen-Red, Arja H., 2004. "Gains and losses from tax competition with migration," Working Papers 2004-01, University of New Orleans, Department of Economics and Finance.

    More about this item

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F15 - International Economics - - Trade - - - Economic Integration
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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