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Trade Liberalization and Heterogeneous Rates of Time Preference across Countries: A Possibility of Trade Deficits with China

  • Harashima, Taiji

Strategies for trade liberalization when the rates of time preference are heterogeneous across countries are examined in the framework of endogenous growth. The paper argues that the best strategy for a country with the relatively higher rate of time preference is the strategy of free trade with wielding market power if the country is large enough to wield market power because all the optimality conditions are satisfied in this case. By this strategy, the current account of the country shows persisting surpluses, which implies a possibility that China has taken this strategy.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 19386.

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Date of creation: 16 Dec 2009
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Handle: RePEc:pra:mprapa:19386
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  1. Paul Romer, 1989. "Endogenous Technological Change," NBER Working Papers 3210, National Bureau of Economic Research, Inc.
  2. Farmer, Roger E A & Lahiri, Amartya, 2003. "Recursive Preferences and Balanced Growth," CEPR Discussion Papers 3949, C.E.P.R. Discussion Papers.
  3. Lawrance, Emily C, 1991. "Poverty and the Rate of Time Preference: Evidence from Panel Data," Journal of Political Economy, University of Chicago Press, vol. 99(1), pages 54-77, February.
  4. Pender, John L., 1996. "Discount rates and credit markets: Theory and evidence from rural india," Journal of Development Economics, Elsevier, vol. 50(2), pages 257-296, August.
  5. Pietro Peretto & Sjak Smulders, 2002. "Technological Distance, Growth And Scale Effects," Economic Journal, Royal Economic Society, vol. 112(481), pages 603-624, July.
  6. Jones, Charles I, 1995. "Time Series Tests of Endogenous Growth Models," The Quarterly Journal of Economics, MIT Press, vol. 110(2), pages 495-525, May.
  7. Becker, Robert A, 1980. "On the Long-Run Steady State in a Simple Dynamic Model of Equilibrium with Heterogeneous Households," The Quarterly Journal of Economics, MIT Press, vol. 95(2), pages 375-82, September.
  8. Ghiglino, Christian, 2002. "Introduction to a General Equilibrium Approach to Economic Growth," Journal of Economic Theory, Elsevier, vol. 105(1), pages 1-17, July.
  9. David Dollar & Aart Kraay, 2004. "Trade, Growth, and Poverty," Economic Journal, Royal Economic Society, vol. 114(493), pages F22-F49, 02.
  10. Jones, Charles I, 1995. "R&D-Based Models of Economic Growth," Journal of Political Economy, University of Chicago Press, vol. 103(4), pages 759-84, August.
  11. Sorger, Gerhard, 2002. "On the Long-Run Distribution of Capital in the Ramsey Model," Journal of Economic Theory, Elsevier, vol. 105(1), pages 226-243, July.
  12. L Alan Winters, 2004. "Trade Liberalisation and Economic Performance: An Overview," Economic Journal, Royal Economic Society, vol. 114(493), pages F4-F21, 02.
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