On the Output Effects of Barriers to Trade

22 Pages Posted: 28 Oct 2006

See all articles by Pedro C. Ferreira

Pedro C. Ferreira

Graduate School of Economics at Fundacao Getulio Vargas (EPGE/FGV)

Alberto Trejos

INCAE; Northwestern University - Department of Economics

Abstract

We study the macroeconomic effects of international trade policy by integrating a Hecksher-Ohlin trade model into an optimal-growth framework. The model predicts that a more open economy will have higher factor productivity. Furthermore, there is a selective development trap to which countries may or may not converge, depending on policy. Income at the development trap falls as trade barriers increase. Hence, cross-country differences in barriers to trade may help explain the dispersion of per capita income observed across countries. The effects are quantified, and we show that protectionism can explain a relevant fraction of TFP and long-run income differentials across countries.

Suggested Citation

Cavalcanti Ferreira, Pedro and Trejos Zuniga, Alberto, On the Output Effects of Barriers to Trade. International Economic Review, Vol. 47, No. 4, pp. 1319-1340, November 2006, Available at SSRN: https://ssrn.com/abstract=940697 or http://dx.doi.org/10.1111/j.1468-2354.2006.00415.x

Pedro Cavalcanti Ferreira (Contact Author)

Graduate School of Economics at Fundacao Getulio Vargas (EPGE/FGV) ( email )

Praia de Botafogo 190/1125, CEP
Rio de Janeiro RJ 22253-900
Brazil
+55 21 559 5840 (Phone)
+55 21 553 8821 (Fax)

Alberto Trejos Zuniga

INCAE ( email )

Campus de Alajuela
Apartado 960-4050
Alajuela
Costa Rica

Northwestern University - Department of Economics

2003 Sheridan Road
Evanston, IL 60208
United States

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