Journal of Economic Integration, 18, 1-16, March 2003.

Trade and the Neoclassical Growth Model

Dan Ben-David
Tel Aviv University and CEPR

Michael B. Loewy
University of South Florida



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.  


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