"Once-off" and Continuing Gains from Trade

M. Scott Taylor

The Review of Economic Studies, 1994, vol. 61, issue 3, 589-601

Abstract: Most economists are familiar with the static or "once-off" welfare gains created by opening an economy to trade. Much less is known about how the resource reallocations necessitated by this move affect long-run growth, and hence whether they provide dynamic or continuing welfare gains in future periods. This paper employs a dynamic Ricardian trade model to provide a decomposition of the gains from trade into "once-off" and continuing categories. In one version of the model, trade is always welfare enhancing; in the other, "once-off" losses may occur alongside dynamic gains. In both versions the magnitude of "once-off" and continuing effects are related to absolute and relative country size, similarity in production structures, rates of time preference, and the productivity of R&D.

Date: 1994
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Persistent link: https://EconPapers.repec.org/RePEc:oup:restud:v:61:y:1994:i:3:p:589-601.

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