The international trade as the sole engine of growth for an economy

  1. Álvarez Albelo, Carmen D.
  2. Manresa, Antonio
  3. Pigem Vigo, Mónica
Journal:
Documentos de trabajo ( XREAP )

Year of publication: 2009

Issue: 6

Type: Working paper

DIALNET GOOGLE SCHOLAR lock_openDialnet editor

Abstract

Can international trade act as the sole engine of growth for an economy? If yes, what are the mechanisms through which trade operates in transmitting permanent growth? This paper answers these questions with two simple two-country models, in which only one country enjoys sustained growth in autarky. The models differ in the assumptions on technical change, which is either labour- or capital-augmenting. In both cases, the stagnant economy imports growth by trading. In the first model, growth is transmitted because of permanent increases in the trade volume. In the alternative framework, the stagnant economy imports sustained growth because its terms of trade permanently improve.

Bibliographic References

  • Abrahamsen, Y., Aeppli, R., Atukeren, E., Graff, M., Müller, C., Schips, B., 2005. The Swiss disease: Facts and artefacts. A reply to Kehoe and Prescott. Review of Economic Dynamics 8, 749-758.
  • Acemoglu, D., Ventura, J., 2002. The world income distribution. Quarterly Journal of Economics 117, 659-694.
  • Alcalá, F., Ciccone, A., 2004. Trade and productivity. Quarterly Journal of Economics 119, 613-646.
  • Athukorala, P.-c., 2000. Manufactured exports and the terms of trade of developing countries: Evidence from Sri Lanka. Journal Development Studies 36, 89-104.
  • Barro, R., 1991. Economic growth in a cross section of countries. Quarterly Journal of Economics 106, 407-443.
  • Coe, D., Helpman, E., Hoffmaister, A., 1997. North-South spillovers. The Economic Journal 107, 134-149.
  • Diewert, W. E., Morrison, C. J., 1986. Adjusting output and productivity indexes for changes in the terms of trade. The Economic Journal 96, 659-679.
  • Ekholm, K., Södersten, B., 2002. Growth and trade vs. trade and growth. Small Business Economics 19, 147-162.
  • Findlay, R., 1980. The terms of trade and equilibrium growth in the world economy. American Economic Review 70, 291-299.
  • Frankel, J. A. and Romer, D., 1999. Does trade cause growth? American Economic Review 89, 379-399.
  • Grossman, G. M., Helpman, E., 1989. Product development and international trade. Journal of Political Economy 97, 1261-1283.
  • Grossman, G. M., (Ed.), 1992. Imperfect competition and international trade. The MIT Press , Cambridge.
  • Grossman, G. M., Helpman, E., 1997. Innovation and growth in the global economy. The MIT Press, Cambridge.
  • Kehoe, T. J., Ruhl K. J., 2005. Is Switzerland in a great depression? Review of Economic Dynamics 8, 759-775.
  • Keller, W., 2004. International technology diffusion. Journal of Economic Literature 42, 752-782.
  • Keller, W., 2002. Trade and the transmission of technology. Journal of Economic Growth 7, 5-24.
  • Kohli, U., 1997. Accounting for recent economic growth in South East Asia. Review of Development Economics 1, 245-256.
  • Lewis, W. A., 1954. Economic development with unlimited supplies of labour. Manchester School Economic Social Studies 22, 139-191.
  • Rodrik, D., Rodríguez, F., 1999. Trade policy and economic growth: A skeptic’s guide to the cross-national evidence. NBER Working Paper No. 7081.
  • Sarkar, P., Singer, H. W., 1991. Manufactured exports of developing countries and their terms of trade since 1965. World Development 19, 333-40.
  • Solow, R. M., 1956. A contribution to the theory of economic growth. Quarterly Journal of Economics 70, 65-94.
  • Ventura, J., 1997. Growth and interdependence. Quarterly Journal of Economics 112, 57-84.
Data source: Dialnet