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Trade liberalisation and endogenous growth: A q-theory approach

  • Baldwin, Richard E.
  • Forslid, Rikard

This paper has two purposes. It introduces a direct approach to policy analysis in endogenous growth models - the q-theory approach - and uses this to illustrate several new openness-and-growth links that appear when we enrich the economic content of the early trade and growth models. The approach - inspired by Tobin's q - is merely a change of state variables and re-interpretation of steady-state conditions. The main difference is its focus on investment, which is after all, the heart of growth models. The approach's simplicity permits us to complicate the early models in interesting directions and to explicitly include trade barriers. The latter allows study of incremental policy reform rather than mere shifts from autarky to free trade (or small deviations from free trade) as in early literature.

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Article provided by Elsevier in its journal Journal of International Economics.

Volume (Year): 50 (2000)
Issue (Month): 2 (April)
Pages: 497-517

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Handle: RePEc:eee:inecon:v:50:y:2000:i:2:p:497-517
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505552

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  1. Richard Baldwin, 1989. "Measureable Dynamic Gains from Trade," NBER Working Papers 3147, National Bureau of Economic Research, Inc.
  2. Alwyn Young, 1998. "Growth without Scale Effects," Journal of Political Economy, University of Chicago Press, vol. 106(1), pages 41-63, February.
  3. Luis A. Rivera-Batiz & Paul M. Romer, 1990. "Economic Integration and Endogenous Growth," NBER Working Papers 3528, National Bureau of Economic Research, Inc.
  4. Richard E. Baldwin & Philippe Martin & Gianmarco I. P. Ottaviano, 1998. "Global Income Divergence, Trade and Industrializatiion: The Geography of Growth Take-Offs," NBER Working Papers 6458, National Bureau of Economic Research, Inc.
  5. Raghuram G. Rajan & Luigi Zingales, 1996. "Financial Dependence and Growth," NBER Working Papers 5758, National Bureau of Economic Research, Inc.
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  7. Aghion, P. & Howitt, P., 1989. "A Model Of Growth Through Creative Destruction," Working papers 527, Massachusetts Institute of Technology (MIT), Department of Economics.
  8. Richard E. Baldwin & Rikard Forslid, 1996. "Trade Liberalization and Endogenous Growth: A q-Theory Approach," NBER Working Papers 5549, National Bureau of Economic Research, Inc.
  9. Paul M Romer, 1999. "Increasing Returns and Long-Run Growth," Levine's Working Paper Archive 2232, David K. Levine.
  10. Dixit, Avinash K & Stiglitz, Joseph E, 1975. "Monopolistic Competition and Optimum Product Diversity," The Warwick Economics Research Paper Series (TWERPS) 64, University of Warwick, Department of Economics.
  11. Richard E. Baldwin, 1992. "On the Growth Effects of Import Competition," NBER Working Papers 4045, National Bureau of Economic Research, Inc.
  12. James Brander & Paul Krugman, 1982. "A 'Reciprocal Dumping' Model of International Trade," Working Papers 513, Queen's University, Department of Economics.
  13. Richard E. Baldwin & Rikard Forslid, 1998. "Incremental Trade and Endogenous Growth: A q-Theory Approach," NBER Working Papers 6477, National Bureau of Economic Research, Inc.
  14. Baldwin, Richard & Seghezza, Elena, 1996. "Trade-induced Investment-led Growth," CEPR Discussion Papers 1420, C.E.P.R. Discussion Papers.
  15. Baldwin, Richard E. & Venables, Anthony J., 1995. "Regional economic integration," Handbook of International Economics, in: G. M. Grossman & K. Rogoff (ed.), Handbook of International Economics, edition 1, volume 3, chapter 31, pages 1597-1644 Elsevier.
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  18. Feenstra, Robert C., 1996. "Trade and uneven growth," Journal of Development Economics, Elsevier, vol. 49(1), pages 229-256, April.
  19. Luis A. Rivera-Batiz & Paul M. Romer, 1991. "International Trade with Endogenous Technological Change," NBER Working Papers 3594, National Bureau of Economic Research, Inc.
  20. Smith, Alasdair & Venables, Anthony J, 1988. "Completing the Internal Market in the European Community: Some Industry Simulations," CEPR Discussion Papers 233, C.E.P.R. Discussion Papers.
  21. Tobin, James, 1969. "A General Equilibrium Approach to Monetary Theory," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 1(1), pages 15-29, February.
  22. Turnovsky, Stephen J., 1996. "Fiscal policy, growth, and macroeconomic performance in a small open economy," Journal of International Economics, Elsevier, vol. 40(1-2), pages 41-66, February.
  23. Rebelo, Sergio, 1991. "Long-Run Policy Analysis and Long-Run Growth," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 500-521, June.
  24. Flam, Harry & Helpman, Elhanan, 1987. "Industrial policy under monopolistic competition," Journal of International Economics, Elsevier, vol. 22(1-2), pages 79-102, February.
  25. Aghion, Philippe & Howitt, Peter, 1992. "A Model of Growth Through Creative Destruction," Scholarly Articles 12490578, Harvard University Department of Economics.
  26. Segerstrom, Paul S & Anant, T C A & Dinopoulos, Elias, 1990. "A Schumpeterian Model of the Product Life Cycle," American Economic Review, American Economic Association, vol. 80(5), pages 1077-91, December.
  27. Neary, J Peter, 1978. "Short-Run Capital Specificity and the Pure Theory of International Trade," Economic Journal, Royal Economic Society, vol. 88(351), pages 488-510, September.
  28. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
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