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Virtual Trade and Growth

Listed author(s):
  • Sugata Marjit

The purpose of this paper is to propose a model where trade has a direct and positive impact on growth rate of two trading nations beyond the level effect. We use the idea of virtual trade in intermediates induced by non- overlapping time zones and show how trade can increase the equilibrium optimal rate of growth. In this structure the trade impact goes beyond the level effect and directly causes growth. Typically standard models of trade cannot generate an automatic growth impact. Virtual trade may allow production to continue for 24x7 in separated time zones such as between US and India and that can lead to higher growth for both countries. Later we extend the model to incorporate accumulation of skill which becomes necessary for sustaining steady state growth.

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File URL: https://dspace.aus.edu:8443/xmlui/bitstream/handle/11073/7682/WPS_Marjit.pdf?sequence=1
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Paper provided by School of Business Administration, American University of Sharjah in its series Economics Working Papers with number 02-01/2015.

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Length: 19 pages
Date of creation:
Handle: RePEc:sha:ecowps:02-01/2015
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  1. 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.
  2. Pinelopi Koujianou Goldberg & Amit Kumar Khandelwal & Nina Pavcnik & Petia Topalova, 2010. "Imported Intermediate Inputs and Domestic Product Growth: Evidence from India," The Quarterly Journal of Economics, Oxford University Press, vol. 125(4), pages 1727-1767.
  3. Rebelo, Sergio, 1991. "Long-Run Policy Analysis and Long-Run Growth," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 500-521, June.
  4. Abhijit Das & Rashmi Banga & Dinesh Kumar, 2011. "Global Economic Crisis : Impact and Restructuring of the Services Sector in India," Trade Working Papers 23225, East Asian Bureau of Economic Research.
  5. 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.
  6. Daron Acemoglu & Jaume Ventura, 2002. "The World Income Distribution," The Quarterly Journal of Economics, Oxford University Press, vol. 117(2), pages 659-694.
  7. Ventura, Jaume, 1997. "Fertility, income distribution and economic growth: Theory and cross-country evidence: Comments," Japan and the World Economy, Elsevier, vol. 9(2), pages 231-234, May.
  8. Findlay, Ronald, 1974. "Relative Prices, Growth and Trade in a Simple Ricardian System," Economica, London School of Economics and Political Science, vol. 41(161), pages 1-13, February.
  9. Lehdonvirta, Vili & Castronova, Edward, 2014. "Virtual Economies: Design and Analysis," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262027259, January.
  10. Kikuchi, Toru & Marjit, Sugata, 2011. "Growth with time zone differences," Economic Modelling, Elsevier, vol. 28(1-2), pages 637-640, January.
  11. Gene M. Grossman & Esteban Rossi-Hansberg, 2008. "Trading Tasks: A Simple Theory of Offshoring," American Economic Review, American Economic Association, vol. 98(5), pages 1978-1997, December.
  12. Luis A. Rivera-Batiz & Paul M. Romer, 1991. "Economic Integration and Endogenous Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 106(2), pages 531-555.
  13. Marjit, Sugata, 2007. "Trade theory and the role of time zones," International Review of Economics & Finance, Elsevier, vol. 16(2), pages 153-160.
  14. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
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