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Economic Development under Alternative Trade Regimes

Abstract

How does openness affect economic development? This question is answered in the context of a dynamic general equilibrium model of the world economy, where countries have technological differences that are both sector-neutral and specific to the investment goods sector. Relative to a benchmark case of trade in credit markets only, consider (i) a complete restriction of trade, and (ii) a full liberalization of trade. The first change decreases the cross-sectional dispersion of incomes only slightly, and produces a relatively small welfare loss. The second change, instead, decreases dispersion by a significant amount, and produces a very large welfare gain.

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Paper provided by Universite de Montreal, Departement de sciences economiques in its series Cahiers de recherche with number 2005-02.

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Length: 39 pages
Date of creation: 2005
Date of revision:
Handle: RePEc:mtl:montde:2005-02
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Keywords: Economic Develoent; International Trade; Investment-Scific Technology; Quantitative Dynamic General Equilibrium; Incomete Markets.;

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Find related papers by JEL classification:
  • E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
  • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
  • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
  • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General

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  11. Jonathan Eaton & Samuel Kortum, 2004. "Trade in Capital Goods," Levine's Working Paper Archive 228400000000000019, David K. Levine.
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Cited by:

  1. Jonathan Eaton & Samuel Kortum, 2004. "Trade in Capital Goods," Levine's Working Paper Archive 228400000000000019, David K. Levine.
  2. Pavel Ševcík, 2012. "Financial Contracts and the Political Economy of Investor Protection," American Economic Journal: Macroeconomics, American Economic Association, vol. 4(4), pages 163-97, October.
  3. Marco Alderighi, 2013. "Air accessibility and the export of Italian manufacture in Europe: Evidence at regional level," ERSA conference papers ersa13p1304, European Regional Science Association.

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