Time Preference,Productivity, and the Growth Effects of Integration
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.
|Date of creation:||04 Jun 1997|
|Date of revision:|
|Note:||Type of Document - WordPerfect; prepared on IBM PC ; to print on HP; pages: 25 ; figures: included|
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