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The Stability of Economic Integration and Endogenous Growth

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  • Michael B. Devereux
  • Beverly J. Lapham

Abstract

This paper examines the transitional dynamics of economic integration in the two country endogenous growth model of Rivera-Batiz and Romer (1991) and in an extension by Rivera-Batiz and Xie (1992). It is shown that, in the absence of knowledge flows across countries economic integration will generically lead to a corner solution where only one country does all the R&D and the other specializes in manufactures. When countries are symmetric the world growth rate in this equilibrium will always be higher than in autarky. When countries differ in their human capital endowment, the world growth rate with trade is always greater than the autarky growth rate of the "low-growth"country, but may or may not be greater than the autarky growth rate of the "high-growth" country.
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Suggested Citation

  • Michael B. Devereux & Beverly J. Lapham, 1994. "The Stability of Economic Integration and Endogenous Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 109(1), pages 299-305.
    • Handle: RePEc:oup:qjecon:v:109:y:1994:i:1:p:299-305.
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    File URL: http://hdl.handle.net/10.2307/2118436
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    1. Francisco L. Rivera-Batiz & Luis A. Rivera-Batiz, 2018. "GATT, Trade, and Growth," World Scientific Book Chapters, in: Francisco L Rivera-Batiz & Luis A Rivera-Batiz (ed.), International Trade, Capital Flows and Economic Development, chapter 3, pages 71-81, World Scientific Publishing Co. Pte. Ltd..
    2. Francisco L. Rivera-Batiz & Luis A. Rivera-Batiz, 2018. "Economic Integration and Endogenous Growth," World Scientific Book Chapters, in: Francisco L Rivera-Batiz & Luis A Rivera-Batiz (ed.), International Trade, Capital Flows and Economic Development, chapter 1, pages 3-32, World Scientific Publishing Co. Pte. Ltd..
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