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A Ricardian model of trade and growth with endogenous trade status

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  • Naito, Takumi

Abstract

We formulate a two-country, continuum-good Ricardian model of trade and endogenous growth with endogenous trade status. After establishing the existence, uniqueness, and global stability of a balanced growth path, we show that, compared with the old balanced growth path, a permanent fall in the trade cost in any one country: (i) raises the growth rates of capital in all countries for all periods; (ii) increases both the range of the imported varieties and that of the exported varieties in all countries for all periods; and (iii) raises welfare in all countries. Our theoretical predictions are qualitatively consistent with the empirical evidence.

Suggested Citation

  • Naito, Takumi, 2012. "A Ricardian model of trade and growth with endogenous trade status," Journal of International Economics, Elsevier, vol. 87(1), pages 80-88.
  • Handle: RePEc:eee:inecon:v:87:y:2012:i:1:p:80-88
    DOI: 10.1016/j.jinteco.2011.11.007
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    Cited by:

    1. 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.
    2. Sugata Marjit, "undated". "Virtual Trade and Growth," Economics Working Papers 02-01/2015, School of Business Administration, American University of Sharjah.
    3. Sugata Marjit & Biswajit Mandal, 2017. "Virtual trade between separated time zones and growth," International Journal of Economic Theory, The International Society for Economic Theory, vol. 13(2), pages 171-183, June.
    4. Wolf-Heimo Grieben & Fuat Sener, 2012. "North-South Trade, Unemployment and Growth: What’s the Role of Labor Unions?," Working Paper Series of the Department of Economics, University of Konstanz 2012-06, Department of Economics, University of Konstanz.
    5. Takumi Naito, 2019. "A larger country sets a lower optimal tariff," Review of International Economics, Wiley Blackwell, vol. 27(2), pages 643-665, May.
    6. Naito, Takumi, 2017. "An asymmetric Melitz model of trade and growth," Economics Letters, Elsevier, vol. 158(C), pages 80-83.
    7. Olatunji Abdul Shobande & Oladimeji Tomiwa Shodipe, 2021. "Monetary Policy Interdependency in Fisher Effect: A Comparative Evidence," Journal of Central Banking Theory and Practice, Central bank of Montenegro, vol. 10(1), pages 203-226.
    8. Cieślik, Andrzej & Parteka, Aleksandra, 2021. "Relative Productivity, Country Size and Export Diversification," Structural Change and Economic Dynamics, Elsevier, vol. 57(C), pages 28-44.
    9. Takumi Naito, 2017. "An Eaton–Kortum model of trade and growth," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 50(2), pages 456-480, May.
    10. Takumi Naito, 2016. "Aid for Trade and Global Growth," Review of International Economics, Wiley Blackwell, vol. 24(5), pages 1178-1201, November.
    11. Sugata Marjit & Anwesha Basu & C. Veeramani, 2019. "Growth Gains from Trade," CESifo Working Paper Series 7905, CESifo.
    12. Petar Stankov, 2017. "Economic Freedom and Welfare Before and After the Crisis," Springer Books, Springer, number 978-3-319-62497-6, December.

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    More about this item

    Keywords

    Ricardian model; Endogenous growth; Endogenous trade status; Unilateral trade liberalization; Terms of trade;
    All these keywords.

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies

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