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Trade, Growth, and Technology Equalization

  • John J. Seater

Trade is shown to increase economic growth purely through comparative advantage without recourse to scale effects, technology transfer, research and development, or even international investment. The resulting growth rates are those that would result from technology transfer, even though no technology transfer actually occurs. A balanced growth rate exists, is identical for all countries and therefore the world, and is asymptotically stable if and only if each country has an absolute (not just comparative) advantage in something. When balanced growth does not exist, trade reduces but does not eliminate differences between countries’ growth rates. Trade therefore does not necessarily guarantee a stable world income distribution. The magnitude of trade's effect on growth depends on the goods imported, not those exported.

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File URL: http://degit.sam.sdu.dk/papers/degit_10/C010_008.pdf
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Paper provided by DEGIT, Dynamics, Economic Growth, and International Trade in its series DEGIT Conference Papers with number c010_008.

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Length: 42 pages
Date of creation: Jun 2005
Date of revision:
Handle: RePEc:deg:conpap:c010_008
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  1. Galor, Oded & Mountford, Andrew, 2006. "Trade and the Great Divergence: The Family Connection," CEPR Discussion Papers 5490, C.E.P.R. Discussion Papers.
  2. Grossman, Gene M & Helpman, Elhanan, 1990. "Comparative Advantage and Long-run Growth," American Economic Review, American Economic Association, vol. 80(4), pages 796-815, September.
  3. Francisco Alcalá & Antonio Ciccone, 2001. "Trade and productivity," Economics Working Papers 580, Department of Economics and Business, Universitat Pompeu Fabra, revised Jul 2002.
  4. Pietro Peretto & Sjak Smulders, 2002. "Technological Distance, Growth And Scale Effects," Economic Journal, Royal Economic Society, vol. 112(481), pages 603-624, July.
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  6. Alwyn Young, 1991. "Learning by Doing and the Dynamic Effects of International Trade," NBER Working Papers 3577, National Bureau of Economic Research, Inc.
  7. Francesco Caselli & Nicola Gennaioli, 2013. "Dynastic Management," Economic Inquiry, Western Economic Association International, vol. 51(1), pages 971-996, 01.
  8. Jones, Larry E & Manuelli, Rodolfo E, 1990. "A Convex Model of Equilibrium Growth: Theory and Policy Implications," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 1008-38, October.
  9. Young, Alwyn, 1991. "Learning by Doing and the Dynamic Effects of International Trade," The Quarterly Journal of Economics, MIT Press, vol. 106(2), pages 369-405, May.
  10. David K. Backus & Patrick J. Kehoe & Timothy J. Kehoe, 1992. "In search of scale effects in trade and growth," Staff Report 152, Federal Reserve Bank of Minneapolis.
  11. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 1002-37, October.
  12. Ronald W. Jones, 2000. "Globalization and the Theory of Input Trade," MIT Press Books, The MIT Press, edition 1, volume 1, number 026210086x, June.
  13. MacDonald, Glenn M & Markusen, James R, 1985. "A Rehabilitation of Absolute Advantage," Journal of Political Economy, University of Chicago Press, vol. 93(2), pages 277-97, April.
  14. Peter Howitt, 2000. "Endogenous Growth and Cross-Country Income Differences," American Economic Review, American Economic Association, vol. 90(4), pages 829-846, September.
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