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An Eaton-Kortum Model of Trade and Growth


  • NAITO Takumi


We combine a multi-country, continuum-good Ricardian model of Eaton and Kortum (2002) with a multi-country AK model of Acemoglu and Ventura (2002) to examine how trade liberalization affects countries' growth rates and extensive margins of trade over time. Focusing on the three-country case, we obtain three main results. First, a permanent fall in any trade cost raises the balanced growth rate. Second, trade liberalization increases the liberalizing countries' long-run fractions of exported varieties to all destinations. Third, the long-run effects of trade liberalization are different from its short-run effects, which can reverse the welfare implications of the static Eaton-Kortum model.

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  • NAITO Takumi, 2012. "An Eaton-Kortum Model of Trade and Growth," Discussion papers 12055, Research Institute of Economy, Trade and Industry (RIETI).
  • Handle: RePEc:eti:dpaper:12055

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    References listed on IDEAS

    1. James E. Anderson & Eric van Wincoop, 2004. "Trade Costs," Journal of Economic Literature, American Economic Association, vol. 42(3), pages 691-751, September.
    2. Baldwin, Richard E. & Robert-Nicoud, Frederic, 2008. "Trade and growth with heterogeneous firms," Journal of International Economics, Elsevier, vol. 74(1), pages 21-34, January.
    3. Christian Broda & David E. Weinstein, 2006. "Globalization and the Gains From Variety," The Quarterly Journal of Economics, Oxford University Press, vol. 121(2), pages 541-585.
    4. Jonathan Eaton & Samuel Kortum, 2012. "Putting Ricardo to Work," Journal of Economic Perspectives, American Economic Association, vol. 26(2), pages 65-90, Spring.
    5. Timothy J. Kehoe & Kim J. Ruhl, 2013. "How Important Is the New Goods Margin in International Trade?," Journal of Political Economy, University of Chicago Press, vol. 121(2), pages 358-392.
    6. 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.
    7. Naito, Takumi, 2012. "A Ricardian model of trade and growth with endogenous trade status," Journal of International Economics, Elsevier, vol. 87(1), pages 80-88.
    8. Daron Acemoglu & Jaume Ventura, 2002. "The World Income Distribution," The Quarterly Journal of Economics, Oxford University Press, vol. 117(2), pages 659-694.
    9. Dornbusch, Rudiger & Fischer, Stanley & Samuelson, Paul A, 1977. "Comparative Advantage, Trade, and Payments in a Ricardian Model with a Continuum of Goods," American Economic Review, American Economic Association, vol. 67(5), pages 823-839, December.
    10. John Romalis, 2007. "Market Access, Openness and Growth," NBER Working Papers 13048, National Bureau of Economic Research, Inc.
    11. Marc J. Melitz, 2003. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," Econometrica, Econometric Society, vol. 71(6), pages 1695-1725, November.
    12. Jonathan Eaton & Samuel Kortum, 2002. "Technology, Geography, and Trade," Econometrica, Econometric Society, vol. 70(5), pages 1741-1779, September.
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    Cited by:

    1. Karsten Mau, 2016. "Export diversification and income differences reconsidered: The extensive product margin in theory and application," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 152(2), pages 351-381, May.

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    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations

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