Carmen Dolores Álvarez-Albelo
Universidad de La Laguna, San Cristóbal de La Laguna, Canary Islands, Spain
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The Transmission of Sustained Growth through the Terms of Trade in an Endogenous Growth Model
Carmen Dolores Álvarez-Albelo,
This paper develops a two-country model of endogenous growth and international trade in intermediate goods. In autarky just one of the economies enjoys sustained growth. The trade situation may be characterized by complete specialization of both countries, or by incomplete specialization of the growing economy. In either case, trade transmits perpetual growth to the stagnant economy because of the permanent improvements in its terms of trade. The existence of a non-reproducible factor in the growing economy is crucial to ensure propagation of growth. Moreover, under incomplete specialization countries converge in per capita income. This result relies on two assumptions. First, there must be a large enough share of world income to pay for the input in which the stagnant economy has comparative advantage. Second, all technologies producing intermediate goods should be equally intensive in the non-reproducible factor. Copyright © 2007 The Authors.
Review of Development Economics 01/2008; 12(2):386-396.
· 0.69 Impact Factor
Review of Development Economics
Universidad de La Laguna
Department of Applied Economics
San Cristóbal de La Laguna, Canary Islands, Spain
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