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On the Static and Dynamic Costs of Trade Restrictions

Author

Listed:
  • Charles van Marrewijk

    (Department of Economics, Erasmus University Rotterdam)

  • Koen Berden

    (Erasmus University Rotterdam)

Abstract

We analyze the costs of trade restrictions for a small developing economy. Capital goods are only introduced on the market if it is profitable to do so. The economy evolves to a balanced growth path in which income, welfare, and the share of introduced capital goods increase if trade restrictions fall. The adjustment path is asymmetric: an increase in trade restrictions will slow-down economic growth, while a decrease may give rise to a rapid catch-up process. The static costs of trade restrictions are smaller than the dynamic costs if, and only if, it changes the share of introduced capital goods.

Suggested Citation

  • Charles van Marrewijk & Koen Berden, 2004. "On the Static and Dynamic Costs of Trade Restrictions," School of Economics and Public Policy Working Papers 2004-06, University of Adelaide, School of Economics and Public Policy.
    • Handle: RePEc:adl:wpaper:2004-06
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    File URL: https://media.adelaide.edu.au/economics/papers/doc/wp2004-06.pdf
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    Cited by:

    1. Van Marrewijk, Charles & Berden, Koen G., 2007. "On the static and dynamic costs of trade restrictions for small developing countries," Journal of Development Economics, Elsevier, vol. 84(1), pages 46-60, September.
    2. Charles Van Marrewijk, 2005. "Basic Exchange Rate Theories," Centre for International Economic Studies Working Papers 2005-01, University of Adelaide, Centre for International Economic Studies.

    More about this item

    Keywords

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    JEL classification:

    • E - Macroeconomics and Monetary Economics
    • F - International Economics
    • O - Economic Development, Innovation, Technological Change, and Growth

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