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A Ricardian model of trade and growth with endogenous trade status

  • Naito, Takumi

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.

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

Volume (Year): 87 (2012)
Issue (Month): 1 ()
Pages: 80-88

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Handle: RePEc:eee:inecon:v:87:y:2012:i:1:p:80-88
DOI: 10.1016/j.jinteco.2011.11.007
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505552

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