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Growth and Trade: The North Can Lose

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  • Spilimbergo, Antonio

Abstract

Several models of growth and trade conclude that a country grows more when trading with a less developed country. This article shows that this conclusion depends crucially on the assuming homothetic preferences and/or having just two goods with respect to learning-by-doing. The article presents a model where the more advanced country (North) can be worse off after trading with a less developed country (South) because the demand pattern of the South is biased toward Northern products with less learning-by-doing potential. Trade can worsen the welfare if the South is large with respect to the North and/or the preference for low-technology goods is high; necessary conditions are that the preferences are nonhomotheticity and that the North exports at least two types of goods. In this context, the article studies the welfare of North and South, separating the static from the dynamic gains from trade. Copyright 2000 by Kluwer Academic Publishers

Suggested Citation

  • Spilimbergo, Antonio, 2000. "Growth and Trade: The North Can Lose," Journal of Economic Growth, Springer, vol. 5(2), pages 131-146, June.
  • Handle: RePEc:kap:jecgro:v:5:y:2000:i:2:p:131-46
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    Cited by:

    1. Leonid Azarnert, 2014. "Agricultural Exports, Tariffs and Growth," Open Economies Review, Springer, vol. 25(4), pages 797-807, September.
    2. Antonio Spilimbergo & Ernesto Stein, 1998. "The Welfare Implications of Trading Blocs among Countries with Different Endowments," NBER Chapters,in: The Regionalization of the World Economy, pages 121-152 National Bureau of Economic Research, Inc.
    3. Keita, Kamei, 2011. "Industrialization and technological progress with many countries under a non-homothetic preference," MPRA Paper 31186, University Library of Munich, Germany.
    4. Vivek B. Arora & Athanasios Vamvakidis, 2004. "How Much Do Trading Partners Matter for Economic Growth?," IMF Working Papers 04/26, International Monetary Fund.
    5. Florian Mayneris, 2017. "Effets des infrastructures de transport sur le niveau et la localisation des activités économiques," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2017023, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    6. Leonid V. Azarnert, 2016. "Trade, Luxury Goods and a Growth Enhancing Tariff," CESifo Working Paper Series 5943, CESifo Group Munich.
    7. Jacob W. Musila & Simon P. Sigué, 2006. "Accelerating foreign direct investment flow to Africa: from policy statements to successful strategies," Managerial Finance, Emerald Group Publishing, vol. 32(7), pages 577-593.
    8. Kamei, Keita & Sasaki, Hiroaki, 2014. "Is Agricultural Productivity Growth Good for Industrialization? Infrastructures and the Welfare Maximizing Tax Rate," MPRA Paper 53606, University Library of Munich, Germany.
    9. Daniel Sakyi & Jose Villaverde & Adolfo Maza & Krishna Reddy Chittedieonardo, 2012. "Trade Openness, Growth and Development: Evidence from Heterogeneous Panel Cointegration Analysis for Middle-Income Countries," REVISTA CUADERNOS DE ECONOMÍA, UN - RCE - CID, August.
    10. Musila, Jacob W. & Yiheyis, Zelealem, 2015. "The impact of trade openness on growth: The case of Kenya," Journal of Policy Modeling, Elsevier, vol. 37(2), pages 342-354.
    11. Isabelle Bensidoun & Guillaume Gaulier & Deniz Ünal-Kesenci, 2001. "The Nature of Specialization Matters for Growth: an Empirical Investigation," Working Papers 2001-13, CEPII research center.
    12. Keita Kamei & Hiroaki Sasaki, 2016. "Agricultural Productivity, Infrastructures and the Optimal Timing of Opening Trade," Manchester School, University of Manchester, vol. 84(5), pages 621-641, September.

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