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Growing through trade: the role of foreign growth and domestic tariffs

Author

Listed:
  • Carmen D. Álvarez-Albelo

    (University of La Laguna)

  • Antonio Manresa

    (CREB, Universitat de Barcelona)

  • Monica Pigem-Vigo

    (CREB, Universitat de Barcelona)

Abstract

This paper studies the role of trading partner’ growth and a domestic import tariff in the possibility of growing through trade. To this purpose, a Ricardian model is developed in which a backward economy seeks to increase its long-run growth rate simply by trading with a faster growing partner. It is found that domestic growth may be either negatively affected or unaffected by a domestic import tariff, while it is always positively impacted by foreign growth. Furthermore, convergence in growth rate can emerge both with an import tariff and under free trade. Ours results are consistent with the empirical evidence.

Suggested Citation

  • Carmen D. Álvarez-Albelo & Antonio Manresa & Monica Pigem-Vigo, 2015. "Growing through trade: the role of foreign growth and domestic tariffs," Working Papers XREAP2015-04, Xarxa de Referència en Economia Aplicada (XREAP), revised Nov 2015.
    • Handle: RePEc:xrp:wpaper:xreap2015-04
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    More about this item

    Keywords

    Growing through trade; technological differences; trading partner’ growth; import tariff;
    All these keywords.

    JEL classification:

    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • O24 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Trade Policy; Factor Movement; Foreign Exchange Policy
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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