Innovation, Growth and Trade in a Two-Country OLG Model

Karl Farmer and Matthias Schelnast ()
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Matthias Schelnast: University of Graz

Chapter 13 in Growth and International Trade, 2013, pp 279-299 from Springer

Abstract: Abstract While international trade in produced commodities and services raise national welfare by exploiting comparative cost advantages and increasing the number of intermediate products, it is by no means clear how international trade raises the GDP growth rate, a conjecture widely held among lay persons. It is the objective of this chapter to introduce trade in intermediate goods into a two-country version of the OLG model of Chap. 6 in order to be able to analyze the growth-enhancing effects of international trade. It turns out that due to the cost-saving effect of a larger number of intermediate-product variants the price of final products steadily decreases and the growth rate of the final product rises compared to the autarky situation.

Keywords: Free Trade; Profit Function; Patent Protection; Choice Problem; Custom Union (search for similar items in EconPapers)
Date: 2013
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Chapter: Innovation, Growth, and Trade in a Two-Country OLG Model (2021)
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DOI: 10.1007/978-3-642-33669-0_13

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