From stationary state to endogenous growth: international trade in the mathematical formulation of the Ricardian system

Neri Salvadori and Rodolfo Signorino

Cambridge Journal of Economics, 2016, vol. 40, issue 3, 895-912

Abstract: In his 1814–15 correspondence with Malthus and in his Essay on Profits, Ricardo championed the free importation of wage goods as a highly effective growth-enhancing policy. In order to capture this aspect in the mathematical formulation of the Ricardian system first introduced by Pasinetti in 1960 in the context of a closed economy, we produce a variant of that model where the economy is a small open one. We show that this economy is characterised by endogenous growth since the growth rate is bounded from below and we locate two thresholds concerning the allocation of labour among the two sectors of the economy and the pattern of international trade.

Date: 2016
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