Trade and the Neoclassical Growth Model
Journal of Economic Integration, Forthcoming
Posted: 9 Dec 2002
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: Suggested Citation