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Time Preference,Productivity, and the Growth Effects of Integration

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  • Michael Frenkel

    (Visiting Konrad Adenauer Professor, Georgetown University)

  • Thomas Trauth

    (University of Mainz)

Abstract

Traditional trade theory emphasizes static gains form trade, whereas the growing literature on endogenous growth is able to explain dynamic gains from trade, i.e., how trade influences economic growth. Empirical studies suggest that dynamic gains are likely to be significantly more important than static gains. More recently, a debate has evolved around the question: do welfare improving effects of trade still prevail when countries are "unequal" in some sense? This paper extends the discussion by investigating how differences in time preference rates and R&D productivity under alternative assumptions concerning knowledge diffusion affect the effect growth. We show that even when a developing country completely looses competitiveness in R&D, it experiences positive welfare improving effects with opening trade.

Suggested Citation

  • Michael Frenkel & Thomas Trauth, 1997. "Time Preference,Productivity, and the Growth Effects of Integration," International Trade 9706002, University Library of Munich, Germany.
    • Handle: RePEc:wpa:wuwpit:9706002
    Note: Type of Document - WordPerfect; prepared on IBM PC ; to print on HP; pages: 25 ; figures: included
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    References listed on IDEAS

    as
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    More about this item

    JEL classification:

    • F1 - International Economics - - Trade
    • F2 - International Economics - - International Factor Movements and International Business

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