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Economic Development under Alternative Trade Regimes

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  • CASTRO, Rui

Abstract

How does openness affect economic development? This question is answered in the context of a dynamic general equilibrium model of the world economy, where countries have technological differences that are both sector-neutral and specific to the investment goods sector. Relative to a benchmark case of trade in credit markets only, consider (i) a complete restriction of trade, and (ii) a full liberalization of trade. The first change decreases the cross-sectional dispersion of incomes only slightly, and produces a relatively small welfare loss. The second change, instead, decreases dispersion by a significant amount, and produces a very large welfare gain.

Suggested Citation

  • CASTRO, Rui, 2005. "Economic Development under Alternative Trade Regimes," Cahiers de recherche 2005-02, Universite de Montreal, Departement de sciences economiques.
    • Handle: RePEc:mtl:montde:2005-02
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    File URL: http://hdl.handle.net/1866/531
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    References listed on IDEAS

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    Cited by:

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    3. Eaton, Jonathan & Kortum, Samuel, 2001. "Trade in capital goods," European Economic Review, Elsevier, vol. 45(7), pages 1195-1235.

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    More about this item

    Keywords

    Economic Develoent; International Trade; Investment-Scific Technology; Quantitative Dynamic General Equilibrium; Incomete Markets.;
    All these keywords.

    JEL classification:

    • E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General

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