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On the static and dynamic costs of trade restrictions

  • Charles van Marrewijk

    (Erasmus University Rotterdam)

  • Koen Berden

    (Tinbergen Institute)

We analyze the costs of trade restrictions for a small developing economy. Capital goods are only introduced on the market if it is profitable to do so. The economy evolves to a balanced growth path in which income, welfare, and the share of introduced capital goods increase if trade restrictions fall. The adjustment path is asymmetric: an increase in trade restrictions will slow-down economic growth, while a decrease may give rise to a rapid catch-up process. The static costs of trade restrictions are smaller than the dynamic costs if, and only if, it changes the share of introduced capital goods.

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File URL: http://econwpa.repec.org/eps/mac/papers/0412/0412011.pdf
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Paper provided by EconWPA in its series Macroeconomics with number 0412011.

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Date of creation: 14 Dec 2004
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Handle: RePEc:wpa:wuwpma:0412011
Note: Type of Document - pdf
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  1. Paul M Romer, 1999. "Endogenous Technological Change," Levine's Working Paper Archive 2135, David K. Levine.
  2. Philippe Aghion & Peter Howitt, 1990. "A Model of Growth Through Creative Destruction," NBER Working Papers 3223, National Bureau of Economic Research, Inc.
  3. Dixit, Avinash K & Stiglitz, Joseph E, 1975. "Monopolistic Competition and Optimum Product Diversity," The Warwick Economics Research Paper Series (TWERPS) 64, University of Warwick, Department of Economics.
  4. David T. Coe & Elhanan Helpman & Alexander Hoffmaister, 1995. "North-South R&D Spillovers," NBER Working Papers 5048, National Bureau of Economic Research, Inc.
  5. Paul M. Romer, 1993. "New Goods, Old Theory, and the Welfare Costs of Trade Restrictions," NBER Working Papers 4452, National Bureau of Economic Research, Inc.
  6. van Marrewijk, Charles, 1999. "Capital Accumulation, Learning, and Endogenous Growth," Oxford Economic Papers, Oxford University Press, vol. 51(3), pages 453-75, July.
  7. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 1002-37, October.
  8. Ethier, Wilfred J, 1982. "National and International Returns to Scale in the Modern Theory of International Trade," American Economic Review, American Economic Association, vol. 72(3), pages 389-405, June.
  9. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
  10. Aghion, Philippe & Howitt, Peter, 1992. "A Model of Growth Through Creative Destruction," Scholarly Articles 12490578, Harvard University Department of Economics.
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