Trade-Induced Investment-Led Growth

CEPR Discussion Paper Series No. 1420

Posted: 4 Oct 1996

See all articles by Elena Seghezza

Elena Seghezza

Universite de Geneve

Richard E. Baldwin

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

Multiple version iconThere are 2 versions of this paper

Date Written: June 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-intensiveness of their exports (contrary to predictions of the old-growth-old-trade models).

JEL Classification: F12, F43

Suggested Citation

Seghezza, Elena and Baldwin, Richard E., Trade-Induced Investment-Led Growth (June 1996). CEPR Discussion Paper Series No. 1420, Available at SSRN: https://ssrn.com/abstract=3866

Elena Seghezza

Universite de Geneve

PO Box 136
Geneva, CH-1211
Switzerland

Richard E. Baldwin (Contact Author)

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

PO Box 136
Geneva, CH-1211
Switzerland
+41 22 908 5933 (Phone)
+41 22 733 3049 (Fax)

HOME PAGE: http://www.hei.unige.ch/~baldwin/

Centre for Economic Policy Research (CEPR)

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United Kingdom

National Bureau of Economic Research (NBER)

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