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



Trade and the Neoclassical Growth Model


Dan Ben-David
Tel Aviv University and CEPR
 
and

Michael B. Loewy
University of South Florida

 

ABSTRACT

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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