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Free Trade and Long-Run Growth

Dan Ben-David () and Michael Loewy ()

No 275620, Foerder Institute for Economic Research Working Papers from Tel-Aviv University > Foerder Institute for Economic Research

Abstract: What is the impact on output of movement towards free trade? Can trade liberalization have a permanent effect on output levels, and more importantly, does it have an impact on steady-state growth rates? The model developed here emphasizes the role that knowledge spillovers emanating from heightened trade can have on long-run growth rates. The model also facilitates an analysis of the dynamic behavior of income levels and terms of trade - as well as growth rates - during the transition between steady states. Among the results of the model, unilateral liberalization by one country generates a positive impact on the steady-state growth of all its partners while at the same time inducing a level effect on the liberalizing country that reduces the income gap between it and other, wealthier, countries. In some cases, the liberalizing country may even leapfrog over initially wealthier countries.

Keywords: Financial Economics; International Relations/Trade (search for similar items in EconPapers)
Pages: 43
Date: 1996-10
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http://ageconsearch.umn.edu/record/275620/files/TEL-AVIV-FSWP-257.pdf (application/pdf)

Related works:
Working Paper: Free Trade and Long-Run Growth (1996)
Working Paper: Free Trade and Long-Run Growth (1995) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:ags:isfiwp:275620

DOI: 10.22004/ag.econ.275620

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