Trade and the Neoclassical Growth Model

20 Pages Posted: 9 Dec 2002

See all articles by Michael B. Loewy

Michael B. Loewy

University of South Florida, Department of Economics

Dan Ben-David

Tel Aviv University - Eitan Berglas School of Economics; Centre for Economic Policy Research (CEPR); NBER

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Abstract

The model developed in this paper expands upon the traditional neoclassical exogenous growth model by facilitating a long-run growth analysis of the impact of openness to trade within a multi-country framework. Openness affects growth by impacting the extent of knowledge spillovers from abroad. This feature effectively converts the traditional closed-economy exogenous growth model into a multi-country, open-economy endogenous growth model. Nevertheless, the conditional convergence and identical growth predictions of the neoclassical model are preserved here with the extent of trade now playing a role in determining the relative heights of the countries' parallel output paths.

Keywords: growth, convergence, trade liberalization

JEL Classification: F43, O41

Suggested Citation

Loewy, Michael B. and Ben-David, Dan, Trade and the Neoclassical Growth Model. Available at SSRN: https://ssrn.com/abstract=359262 or http://dx.doi.org/10.2139/ssrn.359262

Michael B. Loewy (Contact Author)

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Dan Ben-David

Tel Aviv University - Eitan Berglas School of Economics ( email )

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Israel
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Centre for Economic Policy Research (CEPR)

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United Kingdom

NBER

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