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Growth, Expectations, and Tariffs

Listed author(s):
  • Seppo Honkapohja
  • Arja H. Turunen-Red
  • Alan D. Woodland

We study a many country endogenous growth model in which decisions about innovation and new investment are influenced by growth expectations. Adaptive learning dynamics determine country-specific short run transition paths. Countries differ in basic structural parameters and may impose tariffs on imports of capital goods. Numerical experiments illustrate adjustment dynamics that follow the use of tariffs. We show that countries that limit trade in capital goods can experience dynamic gains both in growth and utility and that such gains persist the longer the larger the structural advantages of the region that applies tariffs. Substantial differences in the levels of innovation, consumption, output, and utility can appear, and asymmetries in economic outcomes that were present before trade restrictions are made more severe.

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File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2011/wp-cesifo-2011-04/cesifo1_wp3435.pdf
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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 3435.

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Date of creation: 2011
Handle: RePEc:ces:ceswps:_3435
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  1. Feldstein, Martin, 1982. "Government deficits and aggregate demand," Journal of Monetary Economics, Elsevier, vol. 9(1), pages 1-20.
  2. Seppo Honkapohja & Kaushik Mitra, 2006. "Learning Stability in Economies with Heterogeneous Agents," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 9(2), pages 284-309, April.
  3. Sala-i-Martin, Xavier X, 1996. "The Classical Approach to Convergence Analysis," Economic Journal, Royal Economic Society, vol. 106(437), pages 1019-1036, July.
  4. Robert E. Hall & Charles I. Jones, 1999. "Why Do Some Countries Produce So Much More Output per Worker than Others?," NBER Working Papers 6564, National Bureau of Economic Research, Inc.
  5. Antoni Estevadeordal & Alan M. Taylor, 2013. "Is the Washington Consensus Dead? Growth, Openness, and the Great Liberalization, 1970s–2000s," The Review of Economics and Statistics, MIT Press, vol. 95(5), pages 1669-1690, December.
  6. Timothy Cogley & Thomas J. Sargent, 2008. "Anticipated Utility And Rational Expectations As Approximations Of Bayesian Decision Making," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 49(1), pages 185-221, 02.
  7. Pol Antràs & Esteban Rossi-Hansberg, 2009. "Organizations and Trade," Annual Review of Economics, Annual Reviews, vol. 1(1), pages 43-64, 05.
  8. Howitt, Peter & Mayer-Foulkes, David, 2005. "R&D, Implementation, and Stagnation: A Schumpeterian Theory of Convergence Clubs," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 37(1), pages 147-177, February.
  9. Michael E. Waugh, 2010. "International Trade and Income Differences," American Economic Review, American Economic Association, vol. 100(5), pages 2093-2124, December.
  10. Baldwin, Richard E & Martin, Philippe & Ottaviano, Gianmarco I P, 2001. "Global Income Divergence, Trade, and Industrialization: The Geography of Growth Take-Offs," Journal of Economic Growth, Springer, vol. 6(1), pages 5-37, March.
  11. Evans, George W. & Honkapohja, Seppo & Mitra, Kaushik, 2009. "Anticipated fiscal policy and adaptive learning," Journal of Monetary Economics, Elsevier, vol. 56(7), pages 930-953, October.
  12. Raja Kali & Fabio Mendez & Javier Reyes, 2007. "Trade structure and economic growth," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 16(2), pages 245-269.
  13. Chang-Tai Hsieh & Peter J. Klenow, 2009. "Misallocation and Manufacturing TFP in China and India," The Quarterly Journal of Economics, Oxford University Press, vol. 124(4), pages 1403-1448.
  14. Gauti B. Eggertsson, 2005. "Great expectations and the end of the depression," Staff Reports 234, Federal Reserve Bank of New York.
  15. Seppo Honkapohja & Arja Turunen-Red, 2002. "Complementarity, growth, and trade," Canadian Journal of Economics, Canadian Economics Association, vol. 35(3), pages 495-516, August.
  16. Paul Romer & George Evans & Seppo Hokapohja, "undated". "Growth Cycles," Home Pages _001, Stanford University.
  17. Trefler, Daniel, 1993. "International Factor Price Differences: Leontief Was Right!," Journal of Political Economy, University of Chicago Press, vol. 101(6), pages 961-987, December.
  18. George W. Evans & Seppo Honkapohja, 2009. "Learning and Macroeconomics," Annual Review of Economics, Annual Reviews, vol. 1(1), pages 421-451, 05.
  19. Quah, Danny, 1997. "Empirics for Growth and Distribution: Stratification, Polarization, and Convergence Clubs," CEPR Discussion Papers 1586, C.E.P.R. Discussion Papers.
  20. Robert E. Hall & Charles I. Jones, 1999. "Why do Some Countries Produce So Much More Output Per Worker than Others?," The Quarterly Journal of Economics, Oxford University Press, vol. 114(1), pages 83-116.
  21. Alesina, Alberto & Spolaore, Enrico & Wacziarg, Romain, 2005. "Trade, Growth and the Size of Countries," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 23, pages 1499-1542 Elsevier.
  22. Quah, Danny T, 1997. "Empirics for Growth and Distribution: Stratification, Polarization, and Convergence Clubs," Journal of Economic Growth, Springer, vol. 2(1), pages 27-59, March.
  23. Walz, Uwe, 1997. "Growth and Deeper Regional Integration in a Three-County Model," Review of International Economics, Wiley Blackwell, vol. 5(4), pages 492-507, November.
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