Time Preference,Productivity, and the Growth Effects of Integration

Michael Frenkel and Thomas Trauth
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Michael Frenkel: Visiting Konrad Adenauer Professor, Georgetown University
Thomas Trauth: University of Mainz

International Trade from EconWPA

Abstract: 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.

JEL-codes: F1 F2 (search for similar items in EconPapers)
Date: 1997-06-04
Note: Type of Document - WordPerfect; prepared on IBM PC ; to print on HP; pages: 25 ; figures: included
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