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Trade and the Neoclassical Growth Model


  • Ben-David, Dan

    () (Tel Aviv University, NBER, and CEPR)

  • B. Loewy, Michael

    () (University of South Florida)


The model developed in this paper expands upon the traditional neoclassical exogenous growth model by facilitating a long-run growth analysis of the impact of openness to trade within a multi-country framework. Openness affects growth by impacting the extent of knowledge spillovers from abroad. This feature effectively converts the traditional closed-economy exogenous growth model into a multi-country, open-economy endogenous growth model. Nevertheless, the conditional convergence and identical growth predictions of the neoclassical model are preserved here with the extent of trade now playing a role in determining the relative heights of the countries’ parallel output paths.

Suggested Citation

  • Ben-David, Dan & B. Loewy, Michael, 2003. "Trade and the Neoclassical Growth Model," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 18, pages 1-16.
  • Handle: RePEc:ris:integr:0223

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    References listed on IDEAS

    1. Paolo Mauro, 1996. "The Effects of Corruptionon Growth, Investment, and Government Expenditure," IMF Working Papers 96/98, International Monetary Fund.
    2. Drabek, Zdenek, 1998. "A multilateral agreement on investment: Convincing the sceptics," WTO Staff Working Papers ERAD-98-05, World Trade Organization (WTO), Economic Research and Statistics Division.
    3. Dani Rodrik, 1998. "Why Do More Open Economies Have Bigger Governments?," Journal of Political Economy, University of Chicago Press, vol. 106(5), pages 997-1032, October.
    4. Javorcik, Beata & Wei, Shang-Jin, 2001. "Corruption and Foreign Direct Investment: Firm-Level Evidence," CEPR Discussion Papers 2967, C.E.P.R. Discussion Papers.
    5. Vito Tanzi & Hamid R Davoodi, 1997. "Corruption, Public Investment, and Growth," IMF Working Papers 97/139, International Monetary Fund.
    6. Hoekman, Bernard & Saggi, Kamal, 1999. "Multilateral disciplines for investment-related policies," Policy Research Working Paper Series 2138, The World Bank.
    7. V. Hugo Juan-Ramon & Carlos M. Asilis, 1994. "On Corruption and Capital Accumulation," IMF Working Papers 94/86, International Monetary Fund.
    8. Paolo Mauro, 1995. "Corruption and Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 110(3), pages 681-712.
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    Cited by:

    1. repec:gen:geneem:12302 is not listed on IDEAS
    2. repec:bla:ecaffa:v:37:y:2017:i:3:p:397-410 is not listed on IDEAS
    3. Datta, Manjira, 2017. "Existence and uniqueness of equilibrium in a distorted dynamic small open economy," Economics Letters, Elsevier, vol. 152(C), pages 19-22.
    4. Ingianni, Andrea, 2012. "Intra-European Union trade openness and new members’ output convergence: A time-series analysis," Economics Discussion Papers 2012-5, School of Economics, Kingston University London.
    5. Stefan Sperlich & Yvonne Sperlich, 2012. "Growth and Convergence in South–South Integration Areas: Empirical Evidence," Research Papers by the Institute of Economics and Econometrics, Geneva School of Economics and Management, University of Geneva 12032, Institut d'Economie et Econométrie, Université de Genève.
    6. 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.
    7. Talberth, John & Bohara, Alok K., 2006. "Economic openness and green GDP," Ecological Economics, Elsevier, vol. 58(4), pages 743-758, July.

    More about this item


    Growth; Convergence; Trade liberatization;

    JEL classification:

    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models


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