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Dynamic Gains from Trade

  • Peter Funk

This article examines the validity of a gains from trade proposition in a world in which the direction of technological change is determined endogenously. We first give an extreme example in which a part of the world that would smoothly develop under autarchy forever remains underdeveloped under free trade. An assumption is then introduced, which excludes the example and guarantees that development under free trade dominates development under autarchy in the long-run. The assumption is closely related to the assumption of irreducible markets in McKenzie [1959]. It requires the existence of a `closed scarcity chain' connecting tastes and endowments of all types of consumers. The result complements the classical gains from trade proposition that assumes the state of technological knowledge to be given.

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File URL: http://www.wiwi.uni-bonn.de/bgsepapers/bonsfa/bonsfa509.ps
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Paper provided by University of Bonn, Germany in its series Discussion Paper Serie A with number 509.

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Length: 22 pages
Date of creation: May 1995
Date of revision:
Handle: RePEc:bon:bonsfa:509
Contact details of provider: Postal: Bonn Graduate School of Economics, University of Bonn, Adenauerallee 24 - 26, 53113 Bonn, Germany
Fax: +49 228 73 6884
Web page: http://www.bgse.uni-bonn.de

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  1. Romer, Paul M, 1990. "Endogenous Technological Change," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages S71-102, October.
  2. Aghion, P. & Howitt, P., 1990. "A Model Of Growth Through Creative Destruction," DELTA Working Papers 90-12, DELTA (Ecole normale supérieure).
  3. Funk Peter, 1995. "Bertrand and Walras Equilibria in Large Economies," Journal of Economic Theory, Elsevier, vol. 67(2), pages 436-466, December.
  4. Funk,Peter, 1993. "The direction of technological change," Discussion Paper Serie A 393, University of Bonn, Germany.
  5. CORDELLA, Tito & MINELLI, Enrico & POLEMARCHAKIS, Heracles, 1993. "Trade and Welfare," CORE Discussion Papers 1993033, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  6. Aghion, Philippe & Howitt, Peter, 1992. "A Model of Growth Through Creative Destruction," Scholarly Articles 12490578, Harvard University Department of Economics.
  7. Grandmont, J. M. & McFadden, D., 1972. "A technical note on classical gains from trade," Journal of International Economics, Elsevier, vol. 2(2), pages 109-125, May.
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