Trade Liberalization, Saving, and Development

Hans Jarle Kind

Working Papers from Norwegian School of Economics and Business Administration-

Abstract: Why is there apparently a positive correlation between saving and trade liberalization, in particular for the most successful developing countries? Despite tremendous research efort this puzzle is to a large extent still unresolved. In this general equilibrium model we show one channel which may shed some light on the issue. The basic idea is that trade liberalization may lead firms to use labour in a more indirect way, and thereby increase the incentives to save in order to develop new kinds of intermediate goods. For a backward economy this effect may be particularly strong, in which case trade liberalization possibly initiates a qualitative shift from a labour intensive to a more sophisticated production technology. Possible increases in the export to GDP ratio are then a side effect of the domestic investment and modernization process.

Keywords: TRADE LIBERALIZATION; SAVINGS; ECONOMIC DEVELOPMENT (search for similar items in EconPapers)
JEL-codes: E21 F10 F13 (search for similar items in EconPapers)
Pages: 31 pages
Date: 1998
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Persistent link: https://EconPapers.repec.org/RePEc:fth:norgee:29/98

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