Globalization, economic growth, and innovation: A two-country two-period model

Cuong Le Van (), Duc Le () and Thanh Nguyen-Huu ()
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Cuong Le Van: FTU - Foreign Trade University, Hanoi, Vietnam, IPAG Business School
Duc Le: UP1 - Université Paris 1 Panthéon-Sorbonne
Thanh Nguyen-Huu: Métis Lab EM Normandie - EM Normandie - École de Management de Normandie = EM Normandie Business School

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Abstract: This paper examines how a developing country can benefit from trade liberalization. We develop a two-period model, comprising an autarky phase and a globalization phase, and a two-country framework, featuring a developing country and a developed country (representing the rest of the world). Our findings indicate that globalization may disadvantage a developing country when its total factor productivity (TFP) is significantly lower than that of the developed country. However, we demonstrate that the developing country can still achieve gains from trade openness by allocating part of its capital to innovation during the autarky period, thereby enhancing its TFP.

Keywords: Gain; Investment in innovation; TFP; Globalization (search for similar items in EconPapers)
Date: 2026-10
Note: View the original document on HAL open archive server: https://hal.science/hal-05799799v1
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Published in International Economics, 2026, 187, pp.100725. ⟨10.1016/j.inteco.2026.100725⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-05799799

DOI: 10.1016/j.inteco.2026.100725

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