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Trade and Catching Up to the Industrial Leader

Author

Listed:
  • Juan Carlos Conesa
  • Matthew J. Delventhal
  • Pau S. Pujolas
  • Gajendran Raveendranathan

Abstract

We study the impact of trade on a country catching up to the industrial leader. We calibrate our dynamic, two-country model to Spain and UK from 1850 to 2000, accounting for the inter-war trade collapse (IWTC) and the subsequent catch up by Spain. In our model, the effects of trade disruptions are stronger with more distance to the leader and more openness. A collapse today (less distance, more openness) similar to the IWTC (more distance, less openness) decreases the capital stock thrice as much (12% instead of 4%). Importantly, traded varieties would fall today but increased during the IWTC.

Suggested Citation

  • Juan Carlos Conesa & Matthew J. Delventhal & Pau S. Pujolas & Gajendran Raveendranathan, 2019. "Trade and Catching Up to the Industrial Leader," Department of Economics Working Papers 2019-12, McMaster University.
    • Handle: RePEc:mcm:deptwp:2019-12
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    Cited by:

    1. Pedro Cavalcanti Ferreira & Alberto Trejos, 2022. "Trade and the propagation of global shocks," Economic Inquiry, Western Economic Association International, vol. 60(4), pages 1663-1680, October.

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    More about this item

    Keywords

    Structural Transformation; International Trade;

    JEL classification:

    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • N10 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - General, International, or Comparative
    • N60 - Economic History - - Manufacturing and Construction - - - General, International, or Comparative

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