Trade-Induced Investment-Led Growth

29 Pages Posted: 11 Jun 2000

See all articles by Richard E. Baldwin

Richard E. Baldwin

University of Geneva - Graduate Institute of International Studies (HEI); Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

Elena Seghezza

Universite de Geneve

Multiple version iconThere are 2 versions of this paper

Date Written: May 1996

Abstract

This paper presents five theoretical openness-and-growth links that can account for trade-induced investment-led growth. The links are all demonstrated with neoclassical growth models developed in the context of trade models that allow for imperfect competition and scale economies. This sort of old-growth-theory-in-a-new-trade-model has not been thoroughly explored in the literature since the profession skipped from old-growth-old-trade models straight to new-growth-new- trade models. Nonetheless, such models are necessary to explain several key aspects of the econometric evidence on trade and growth. For example, cross-country data suggests that openness influences growth only via its effect on investment, and suggests that openness promotes investment in all countries whatever the capital-intensive of their exports (contrary to predictions of the old-growth-old-trade models).

Suggested Citation

Baldwin, Richard E. and Seghezza, Elena, Trade-Induced Investment-Led Growth (May 1996). NBER Working Paper No. w5582, Available at SSRN: https://ssrn.com/abstract=225532

Richard E. Baldwin (Contact Author)

University of Geneva - Graduate Institute of International Studies (HEI) ( email )

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Centre for Economic Policy Research (CEPR)

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United Kingdom

National Bureau of Economic Research (NBER)

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Cambridge, MA 02138
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Elena Seghezza

Universite de Geneve

PO Box 136
Geneva, CH-1211
Switzerland

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