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

Author

Listed:
  • Taiji Harashima

    (University of Tsukuba & Cabinet Office of Japan)

Abstract

Strategies for trade liberalization in developing countries when time preference rates are heterogeneous across countries are examined in the context of endogenous growth. The paper concludes that the best strategy for a developing country with the higher rate of time preference is generally 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 and markets are not distorted. By this strategy, the country generally accumulates current account surpluses, which implies a possibility that China implicitly has taken this strategy.

Suggested Citation

  • Taiji Harashima, 2005. "Trade Liberalization and Heterogeneous Time Preference across Countries: A Possibility of Trade Deficits with China," International Trade 0505015, EconWPA, revised 22 Dec 2005.
  • Handle: RePEc:wpa:wuwpit:0505015
    Note: Type of Document - pdf; pages: 49
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    File URL: http://econwpa.repec.org/eps/it/papers/0505/0505015.pdf
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    Cited by:

    1. Taiji Harashima, 2005. "The Pro-cyclical R&D Puzzle: Technology Shocks and Pro-cyclical R&D Expenditure," Macroeconomics 0507012, EconWPA, revised 12 Jul 2005.
    2. Taiji Harashima, 2005. "An Estimate of the Elasticity of Intertemporal Substitution in a Production Economy," Macroeconomics 0508030, EconWPA.

    More about this item

    Keywords

    Trade Liberalization; The rate of time preference; Heterogeneity; Trade deficits; China;

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies

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