The international trade as the sole engine of growth for an economy

Can international trade act as the sole engine of growth for an economy? If yes, what are the mechanisms through which trade operates in transmitting permanent growth? This paper answers these questions with two simple two-country models, in which only one country enjoys sustained growth in autarky. The models differ in the assumptions on technical change, which is either labour- or capital-augmenting. In both cases, the stagnant economy imports growth by trading. In the first model, growth is transmitted because of permanent increases in the trade volume. In the alternative framework, the stagnant economy imports sustained growth because its terms of trade permanently improve.

Competing engines of growth: Innovation and standardization

We study a dynamic general equilibrium model where innovation takes theform of the introduction of new goods whose production requires skilled workers.Innovation is followed by a costly process of standardization, whereby these newgoods are adapted to be produced using unskilled labor. Our framework highlightsa number of novel results. First, standardization is both an engine of growth anda potential barrier to it. As a result, growth is an inverse U-shaped function ofthe standardization rate (and of competition). Second, we characterize the growthand welfare maximizing speed of standardization. We show how optimal protection of intellectual property rights affecting the cost of standardization vary withthe skill-endowment, the elasticity of substitution between goods and other parameters. Third, we show that, depending on how competition between innovatingand standardizing firms is modelled and on parameter values, a new type of multiplicity of equilibria may arise. Finally, we study the implications of our model forthe skill-premium and we illustrate novel reasons for linking North-South trade tointellectual property rights protection.

Trade, extent of the market and economic growth 1960-1996

We find that trade and domestic market size are robust determinants of economic growth overthe 1960-1996 period when trade openness is measured as the US dollar value of imports andexports relative to GDP in PPP US$ ('real openness'). When trade openness is measured asthe US dollar value of imports and exports relative to GDP in exchange rate US$ ('nominalopenness') however, trade and the size of domestic markets are often non-robust determinantsof growth. We argue that real openness is the more appropriate measure of trade and that ourempirical results should be seen as evidence in favor of the extent-of-the-market hypothesis.

Linkages of dietary patterns, international trade and land use: the case of olive oil in the European Union

Within only two decades olive oil developed from a niche product which could hardly be found in food stores outside the producing regions towards an integrated component in the diets of industrial countries. This paper discusses the impacts of the promotion of the “healthy Mediterranean diet” on land use and agro-ecosystems in the producing countries. It examines the dynamics of olive oil production, trade and consumption in the EU15 in the period 1972 to 2003 and the links between dietary patterns, trade and land use. It analyses the underlying socio-economic driving forces behind the increasing spatial disconnect between production and consumption of olive oil in the EU15 and in particular in Spain, the world largest producer during the last three decades. In the observed period olive oil consumption increased 16 fold in the non-producing EU15 countries. In the geographically limited producing regions like Spain, the 5 fold increase in export production was associated with the rapid industrialization of olive production, the conversion of vast Mediterranean landscapes to olive monocultures and a range of environmental pressures. High amounts of subsidies of the European Common Agricultural Policy and feedback loops within production and consumption systems were driving the transformation of the olive oil system. Our analysis indicates the process of change was not immediately driven by increases in demand for olive oil in non-producing countries, but rather by the institutional setting of the European Union and by concerted political interventions.

Trade, Extent of the Market, and Economic Growth 1960-1996

We find that trade and domestic market size are robust determinants of economic growth over the 1960-1996 period when trade openness is measured as the US dollar value of imports and exports relative to GDP in PPP US$ ('real openness'). When trade openness is measured as the US dollar value of imports and exports relative to GDP in exchange rate US$ ('nominal openness') however, trade and the size of domestic markets are often non-robust determinants of growth. We argue that real openness is the more appropriate measure of trade and that our empirical results should be seen as evidence in favor of the extent-of-the-market hypothesis.

A global view of economic growth

This paper integrates in a unified and tractable framework some of the key insights of the field of international trade and economic growth. It examines a sequence of theoretical models that share a common description of technology and preferences but differ on their assumptions about trade frictions. By comparing the predictions of these models against each other, it is possible to identify a variety of channels through which trade affects the evolution of world income and its geographical distribution. By comparing the predictions of these models against the data, it is also possible to construct coherent explanations of income differences and long-run trends in economic growth.

Horizontal innovation in the theory of growth and development

We analyze recent contributions to growth theory based on the model of expanding variety of Romer (1990). In the first part, we present different versions of the benchmark linear model with imperfect competition. These include the labequipment model, labor-for-intermediates and directed technical change . We review applications of the expanding variety framework to the analysis of international technology diffusion, trade, cross-country productivity differences, financial development and fluctuations. In many such applications, a key role is played by complementarities in the process of innovation.

Colombian international trade from a physical perspective: towards an ecologial "Prebisch Thesis"

Prebisch's approach to economic development was based on the notion that there is an international historical division of labour. Peripheral countries are specialized in exporting primary goods while centre countries export industrial goods. The Terms of trade for peripheral countries tend to deteriorate. This approach can be extendend to ecological issues. The international Centre-Periphery division does not only involve the monetary exchange of goods and capital, but also the physical exchange in which Southern countries provide materials and energy so that Northern countries can develop their socioconomic metabolism. This metabolism process is guaranteed through cheap prices for primary goods. This paper aims to apply and extend Prebisch's thought on unequal exchange, both monetary and ecological, in relation to colombian trade in the period 1970-2002, using material flow analysis.

Explaining High Economic Growth in Small Tourism Countries with a Dynamic General Equilibrium Model

This paper shows that tourism specialisation can help to explain the observed high growth rates of small countries. For this purpose, two models of growth and trade are constructed to represent the trade relations between two countries. One of the countries is large, rich, has an own source of sustained growth and produces a tradable capital good. The other is a small poor economy, which does not have an own engine of growth and produces tradable tourism services. The poor country exports tourism services to and imports capital goods from the rich economy. In one model tourism is a luxury good, while in the other the expenditure elasticity of tourism imports is unitary. Two main results are obtained. In the long run, the tourism country overcomes decreasing returns and permanently grows because its terms of trade continuously improve. Since the tourism sector is relatively less productive than the capital good sector, tourism services become relatively scarcer and hence more expensive than the capital good. Moreover, along the transition the growth rate of the tourism economy holds well above the one of the rich country for a long time. The growth rate differential between countries is particularly high when tourism is a luxury good. In this case, there is a faster increase in the tourism demand. As a result, investment of the small economy is boosted and its terms of trade highly improve.

CO2 emissions embodied in international trade: A multiregional Inputoutput model for Spain

As a result of globalization and free trade agreements, international trade is enormously growing and inevitably putting more pressure on the environment over the last few decades. This has drawn the attention of both environmentalist and economist in response to the ever growing concerns of climate change and urgent need of international action for its mitigation. In this work we aim at analyzing the implication of international trade in terms of CO2 between Spain and its important partners using a multi-regional input-output (MRIO) model. A fully integrated 13 regions MRIO model is constructed to examine the pollution responsibility of Spain both from production and consumption perspectives. The empirical results show that Spain is a net importer of CO2 emissions which is equivalent to 29% of its emission due to production. Even though the leading partner with regard to import values are countries such as Germany, France, Italy and Great Britain, the CO2 embodied due to trade with China takes the largest share. This is mainly due to the importation of energy intensive products from China coupled with Chinese poor energy mix which is dominated by coal-power plant. The largest portion (67%) of the global imported CO2 emissions is due to intermediate demand requirements by production sectors. Products such as Motor vehicles, chemicals, a variety of machineries and equipments, textile and leather products, construction materials are the key imports that drive the emissions due to their production in the respective exporting countries. Being at its peak in 2005, the Construction sector is the most responsible activity behind both domestic and imported emissions.

The Three Horsemen of Growth: Plague, War and Urbanization in Early Modern Europe

How did Europe overtake China? We construct a simple Malthusian model with two sectors, and use it to explain how European per capita incomes and urbanization rates could surge ahead of Chinese ones. That living standards could exceed subsistence levels at all in a Malthusian setting should be surprising. Rising fertility and falling mortality ought to have reversed any gains. We show that productivity growth in Europe can only explain a small fraction of rising living standards. Population dynamics - changes of the birth and death schedules - were far more important drivers of the longrun Malthusian equilibrium. The Black Death raised wages substantially, creating important knock-on effects. Because of Engel's Law, demand for urban products increased, raising urban wages and attracting migrants from rural areas. European cities were unhealthy, especially compared to Far Eastern ones. Urbanization pushed up aggregate death rates. This effect was reinforced by more frequent wars (fed by city wealth) and disease spread by trade. Thus, higher wages themselves reduced population pressure. Without technological change, our model can account for the sharp rise in European urbanization as well as permanently higher per capita incomes. We complement our calibration exercise with a detailed analysis of intra-European growth in the early modern period. Using a panel of European states in the period 1300-1700, we show that war frequency can explain a good share of the divergent fortunes within Europe.

Knowledge Licensing in a Model of R&D-driven Endogenous Growth

In this paper I present an endogenous growth model where the engine of growth is in-house R&D performed by high-tech firms. I model knowledge (patent) licensing among high-tech firms. I show that if there is knowledge licensing, high-tech firms innovate more and economic growth is higher than in cases when there are knowledge spillovers or there is no exchange of knowledge among high-tech firms. However, in case when there is knowledge licensing the number of high-tech firms is lower than in cases when there are knowledge spillovers or there is no exchange of knowledge.

Knowledge Licensing in a Model of R&D-driven Endogenous Growth

In this paper I present an endogenous growth model where the engine of growth is in-house R&D performed by high-tech firms. I model knowledge (patent) licensing among high-tech firms. I show that if there is knowledge licensing, high-tech firms innovate more and economic growth is higher than in cases when there are knowledge spillovers or there is no exchange of knowledge among high-tech firms. However, in case when there is knowledge licensing the number of high-tech firms is lower than in cases when there are knowledge spillovers or there is no exchange of knowledge.