An Eaton-Kortum Model of Trade and Growth

Takumi Naito

Discussion papers from Research Institute of Economy, Trade and Industry (RIETI)

Abstract: We combine a multi-country, continuum-good Ricardian model of Eaton and Kortum (2002) with a multi-country AK model of Acemoglu and Ventura (2002) to examine how trade liberalization affects countries' growth rates and extensive margins of trade over time. Focusing on the three-country case, we obtain three main results. First, a permanent fall in any trade cost raises the balanced growth rate. Second, trade liberalization increases the liberalizing countries' long-run fractions of exported varieties to all destinations. Third, the long-run effects of trade liberalization are different from its short-run effects, which can reverse the welfare implications of the static Eaton-Kortum model.

Pages: 29 pages
Date: 2012-09
New Economics Papers: this item is included in nep-fdg and nep-int
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: An Eaton-Kortum model of trade and growth (2017)
Journal Article: An Eaton–Kortum model of trade and growth (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:eti:dpaper:12055

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