Economic Development under Alternative Trade Regimes
Article [Version of Record]
Is part of
Cahier de recherche ; no. 2005-02.Publisher(s)
Université de Montréal. Département de sciences économiques.Affiliation
Keywords
- Economic Development
- International Trade
- Investment-Specific Technology
- Quantitative Dynamic General Equilibrium
- Incomplete Markets
- [JEL:E13] Macroeconomics and Monetary Economics - General Aggregative Models - Neoclassical
- [JEL:F43] International Economics - Macroeconomic Aspects of International Trade and Finance - Economic Growth of Open Economies
- [JEL:O11] Economic Development, Technological Change, and Growth - Economic Development - Macroeconomic Analyses of Economic Development
- [JEL:O30] Economic Development, Technological Change, and Growth - Technological Change; Research and Development - General
- [JEL:E13] Macroéconomie et économie monétaire - Modèles généraux d'aggrégation - Macroéconomie néoclassique
- [JEL:F43] Économie internationale - Aspects macroéconomiques du commerce international et de la finance internationale - Croissance économique des économies ouvertes
- [JEL:O11] Développement économique, changement technologique et croissance - Développement économique - Analyse macroéconomique du développement économique
- [JEL:O30] Développement économique, changement technologique et croissance - Changement technologique - Généralités
Abstract(s)
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.
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