A Ricardian model of trade and growth with endogenous trade status

Takumi Naito

Journal of International Economics, 2012, vol. 87, issue 1, 80-88

Abstract: We formulate a two-country, continuum-good Ricardian model of trade and endogenous growth with endogenous trade status. After establishing the existence, uniqueness, and global stability of a balanced growth path, we show that, compared with the old balanced growth path, a permanent fall in the trade cost in any one country: (i) raises the growth rates of capital in all countries for all periods; (ii) increases both the range of the imported varieties and that of the exported varieties in all countries for all periods; and (iii) raises welfare in all countries. Our theoretical predictions are qualitatively consistent with the empirical evidence.

Keywords: Ricardian model; Endogenous growth; Endogenous trade status; Unilateral trade liberalization; Terms of trade (search for similar items in EconPapers)
JEL-codes: F13 F43 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (16)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:inecon:v:87:y:2012:i:1:p:80-88

DOI: 10.1016/j.jinteco.2011.11.007

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