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Trade and Catching Up to the Industrial Leader

Juan Carlos Conesa (), Matthew J. Delventhal, Pau Pujolas () and Gajendran Raveendranathan

Department of Economics Working Papers from McMaster University

Abstract: We study the impact of trade on a country catching up to the industrial leader. We calibrate our dynamic, two-country model to Spain and UK from 1850 to 2000, accounting for the inter-war trade collapse (IWTC) and the subsequent catch up by Spain. In our model, the effects of trade disruptions are stronger with more distance to the leader and more openness. A collapse today (less distance, more openness) similar to the IWTC (more distance, less openness) decreases the capital stock thrice as much (12% instead of 4%). Importantly, traded varieties would fall today but increased during the IWTC.

Keywords: Structural Transformation; International Trade (search for similar items in EconPapers)
JEL-codes: F11 F12 N10 N60 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2019-10
New Economics Papers: this item is included in nep-his and nep-ore
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Persistent link: https://EconPapers.repec.org/RePEc:mcm:deptwp:2019-12

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