On the static and dynamic costs of trade restrictions

Charles van Marrewijk () and Koen Berden
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Koen Berden: Tinbergen Institute

Macroeconomics from EconWPA

Abstract: 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.

Keywords: growth; development; static and dynamic costs; trade restrictions; new goods (search for similar items in EconPapers)
JEL-codes: F O (search for similar items in EconPapers)
Date: 2004-12-14
Note: Type of Document - pdf
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Persistent link: http://EconPapers.repec.org/RePEc:wpa:wuwpma:0412011

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