A Ricardian model of trade and growth with endogenous trade status

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8 Citations (Scopus)

Abstract

We formulate a two-country, continuum-good Ricardian model of trade and endogenous growth with endogenous trade status. After establishing the existence, uniqueness, and global stability of a balanced growth path, we show that, compared with the old balanced growth path, a permanent fall in the trade cost in any one country: (i) raises the growth rates of capital in all countries for all periods; (ii) increases both the range of the imported varieties and that of the exported varieties in all countries for all periods; and (iii) raises welfare in all countries. Our theoretical predictions are qualitatively consistent with the empirical evidence.

Original languageEnglish
Pages (from-to)80-88
Number of pages9
JournalJournal of International Economics
Volume87
Issue number1
DOIs
Publication statusPublished - 2012 May 1

Keywords

  • Endogenous growth
  • Endogenous trade status
  • Ricardian model
  • Terms of trade
  • Unilateral trade liberalization

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics

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