Journal of Economic Growth, 3, 143-170, July 1998.


Dan Ben-David
Tel Aviv University,

Michael B. Loewy
University of South Florida



What is the impact on output of movement towards free trade?  Can trade liberalization have a permanent affect on output levels, and more importantly, does it have an impact on steady-state growth rates?  The model developed here emphasizes the role that knowledge spillovers emanating from heightened trade can have on income convergence and growth rates over the long run.  The model also facilitates an analysis of the dynamic behavior of income levels and terms of trade - as well as growth rates - during the transition between steady states.  Among the results of the model, unilateral liberalization by one country induces a level effect on the liberalizing country that reduces the income gap between it and other, wealthier, countries.  In some cases, the liberalizing country may even leapfrog over initially wealthier countries.  From the long-run growth perspective, unilateral (and multilateral) liberalization generates a positive impact on the steady-state growth of all the trading countries.  


download pdf file
To read or print the .pdf file, you need the Adobe Acrobat Reader, which can be obtained free of charge  from: Adobe.