Economics at your fingertips  

Trade, Growth, and the World Income Distribution

John Seater () and Lei Ji

DEGIT Conference Papers from DEGIT, Dynamics, Economic Growth, and International Trade

Abstract: We construct and test a theory of how international trade and endogenous economic growth interact to affect the evolution of cross-country differences in GDP. The theory combines a second-generation endogenous growth model with a Ricardian model of trade. The driver of growth is technical progress in improving the quality of intermediate goods.. Intermediates are tradeable, and trade in them allows countries to affect each other's growth rates. The theory describes both balanced growth paths and transition dynamics. Under some conditions trade equalizes countries' growth rates and thus stabilizes their relative GDPs, under other conditions trade does not equalize growth rates initially but brings them into equality eventually, and under still other conditions trade drives countries’ growth rates asymptotically to a constant difference, leaving some countries growing faster than others forever. This last case is consistent with Quah’s (1997) famous empirical "twin peaks." The model provides a closed-form solution for transition dynamics as well as balanced growth paths. allowing a complete description of the evolution of countries’ relative GDPs. A large number of testable implications emerge from the model, some of which distinguish it from competing theories of world income distribution dynamics. Preliminary test results support our theory.

Keywords: international trade; endogenous growth; world income distribution; cross-country distribution of GDP (search for similar items in EconPapers)
Pages: 29 pages JEL Classification: O33, O40, F12, F15, F43
Date: 2012-09
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link) (application/pdf)
Our link check indicates that this URL is bad, the error code is: 500 Can't connect to (No such host is known. )

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Access Statistics for this paper

More papers in DEGIT Conference Papers from DEGIT, Dynamics, Economic Growth, and International Trade Contact information at EDIRC.
Bibliographic data for series maintained by Jan Pedersen ().

Page updated 2023-01-24
Handle: RePEc:deg:conpap:c017_033