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Time preference, productivity, and the growth effects of integration

  • Michael Frenkel

    (Georgetown University)

  • Thomas Trauth

    (University of Mainz Germany)

Registered author(s):

    Traditional trade theory emphasizes static gains form trade, whereas the growing literature on endogenous growth is able to explain dynamic gains from trade, i.e., how trade influences economic growth. Empirical studies suggest that dynamic gains are likely to be significantly more important than static gains. More recently, a debate has evolved around the question: do welfare improving effects of trade still prevail when countries are "unequal" in some sense? This paper extends the discussion by investigating how differences in time preference rates and R&D productivity under alternative assumptions concerning knowledge diffusion affect the effect growth. We show that even when a developing country completely looses competitiveness in R&D, it experiences positive welfare improving effects with opening trade.

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    File URL: http://128.118.178.162/eps/it/papers/9607/9607001.pdf
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    Paper provided by EconWPA in its series International Trade with number 9607001.

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    Length: 25 pages
    Date of creation: 11 Jul 1996
    Date of revision:
    Handle: RePEc:wpa:wuwpit:9607001
    Note: Type of Document - WordPerfect ; prepared on IBM PC ; to print on HP ; pages: 25 ; figures: included .
    Contact details of provider: Web page: http://128.118.178.162

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    1. Grossman, Gene M & Helpman, Elhanan, 1990. "Comparative Advantage and Long-run Growth," American Economic Review, American Economic Association, vol. 80(4), pages 796-815, September.
    2. Grossman, G.M. & Helpman, E., 1994. "Technology and Trade," Papers 175, Princeton, Woodrow Wilson School - Public and International Affairs.
    3. Rivera-Batiz, Luis A. & Romer, Paul M., 1991. "International trade with endogenous technological change," European Economic Review, Elsevier, vol. 35(4), pages 971-1001, May.
    4. Paul Romer, 1989. "Endogenous Technological Change," NBER Working Papers 3210, National Bureau of Economic Research, Inc.
    5. Rivera-Batiz, Luis A. & Xie, Danyang, 1993. "Integration among unequals," Regional Science and Urban Economics, Elsevier, vol. 23(3), pages 337-354, July.
    6. Alwyn Young, 1991. "Learning by Doing and the Dynamic Effects of International Trade," NBER Working Papers 3577, National Bureau of Economic Research, Inc.
    7. Luis A. Rivera-Batiz & Paul M. Romer, 1990. "Economic Integration and Endogenous Growth," NBER Working Papers 3528, National Bureau of Economic Research, Inc.
    8. Young, Alwyn, 1991. "Learning by Doing and the Dynamic Effects of International Trade," The Quarterly Journal of Economics, MIT Press, vol. 106(2), pages 369-405, May.
    9. Devereux, Michael B & Lapham, Beverly J, 1994. "The Stability of Economic Integration and Endogenous Growth," The Quarterly Journal of Economics, MIT Press, vol. 109(1), pages 299-305, February.
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