Capital Accumulation and Dynamic Gains from Trade PDF Download
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Author: B. Ravikumar
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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Book Description
We compute welfare gains from trade in a dynamic, multicountry model with capital accumulation. We examine transition paths for 93 countries following a permanent, uniform, unanticipated trade liberalization. Both the relative price of investment and the investment rate respond to changes in trade frictions. Relative to a static model, the dynamic welfare gains in a model with balanced trade are three times as large. The gains including transition are 60 percent of those computed by comparing only steady states. Trade imbalances have negligible effects on the cross-country distribution of dynamic gains. However, relative to the balanced-trade model, small, less-developed countries accrue the gains faster in a model with trade imbalances by running trade deficits in the short run but have lower consumption in the long-run. In both models, most of the dynamic gains are driven by capital accumulation.
Author: B. Ravikumar
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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Book Description
We compute welfare gains from trade in a dynamic, multicountry model with capital accumulation. We examine transition paths for 93 countries following a permanent, uniform, unanticipated trade liberalization. Both the relative price of investment and the investment rate respond to changes in trade frictions. Relative to a static model, the dynamic welfare gains in a model with balanced trade are three times as large. The gains including transition are 60 percent of those computed by comparing only steady states. Trade imbalances have negligible effects on the cross-country distribution of dynamic gains. However, relative to the balanced-trade model, small, less-developed countries accrue the gains faster in a model with trade imbalances by running trade deficits in the short run but have lower consumption in the long-run. In both models, most of the dynamic gains are driven by capital accumulation.
Author: Romain Wacziarg
Publisher: World Bank Publications
ISBN:
Category : Capital
Languages : en
Pages : 57
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Book Description
November 1998 Empirical analysis confirms that a policy of trade openness has a strong positive impact on economic growth. The accelerated accumulation of physical capital accounts for more than half this growth. Enhanced technological transmissions and improvements in the quality of macroeconomic policy each account for about 20 percent of the effect of openness on growth. Wacziarg investigates the links between trade policy and economic growth using data from a panel of 57 countries from 1970-89. This is the first attempt to empirically evaluate, in a cross-country context, the respective roles of various theories of dynamic gains from trade in explaining the observed positive impact of trade openness on economic growth. Wacziarg uses a new measure of trade openness, based on the effective policy component of trade shares, in a simultaneous equations system aimed at identifying the effect of trade policy on several determinants of growth. The results suggest that a policy of trade openness has a strong positive impact on economic growth. The accelerated accumulation of physical capital accounts for more than half this effect. Enhanced technological transmissions and improvements in the quality of macroeconomic policy each account for about 20 percent of the impact of trade openness on growth. This decomposition is robust to alternative specifications and time periods. Wacziarg also successfully tests whether the empirical methodology captures all or most of the effects of trade policy on growth. The lack of statistically significant results concerning several other channels may be due to measurement problems. The black market premium may be a weak proxy for the efficiency of the price system. Moreover, international technological transmissions are very hard to measure, so there may be a downward bias in the estimates based on the manufactured exports channel, and a corresponding overstatement of other channels. This paper-a product of the Development Prospects Group, Development Economics-is part of a larger effort in the Bank to analyze the relationship between openness and economic growth. The author may be contacted at
[email protected].
Author: Joseph F. Francois
Publisher:
ISBN:
Category : Free trade
Languages : en
Pages : 84
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Author: B. Ravikumar
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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Author: Michael Sposi
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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Book Description
Motivated by increasing trade and fragmentation of production across countries since World War II, we build a dynamic two-country model featuring sequential, multi-stage production and capital accumulation. As trade costs decline over time, global-value-chain (GVC) trade expands across countries, particularly more in the faster growing country, consistent with the empirical pattern. The presence of GVC trade boosts capital accumulation and economic growth and magnifies dynamic gains from trade. At the same time, endogenous capital accumulation shapes comparative advantage across countries, impacting the dynamics of GVC trade: a country becoming more capital abundant concentrates more on the capital-intensive stage of the production.
Author: Wyatt Brooks
Publisher:
ISBN:
Category :
Languages : en
Pages : 33
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Book Description
We measure the gains from a trade cost reduction in a model with dynamic accumulation of factors. We show that the tight link between import intensity and gains from trade that exists in static models breaks down along transition paths in dynamic models. When trade costs are reduced, the need to accumulate factors temporarily shifts spending from consumption to investment. Import intensity may rise or fall along the transition path, depending on the relative import intensity of consumption and investment. Calibrating the model to the U.S. economy, we find that investment is more import intensive than consumption, so that import intensity is falling along the transition path even as consumption is rising. Therefore, while higher import intensity is associated with higher consumption when comparing steady states (as in static models), it is associated with lower consumption along a given transition path. We also consider the case of endogenous firm creation as another form of investment and factor accumulation, and again find a negative relationship between consumption and import intensity along the transition path.
Author: Romain T. Wacziarg
Publisher:
ISBN:
Category :
Languages : en
Pages : 51
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Book Description
Empirical analysis confirms that a policy of trade openness has a strong positive impact on economic growth. The accelerated accumulation of physical capital accounts for more than half this growth. Enhanced technological transmissions and improvements in the quality of macroeconomic policy each account for about 20 percent of the effect of openness on growth.Wacziarg investigates the links between trade policy and economic growth using data from a panel of 57 countries from 1970-89. This is the first attempt to empirically evaluate, in a cross-country context, the respective roles of various theories of dynamic gains from trade in explaining the observed positive impact of trade openness on economic growth. Wacziarg uses a new measure of trade openness, based on the effective policy component of trade shares, in a simultaneous equations system aimed at identifying the effect of trade policy on several determinants of growth. The results suggest that a policy of trade openness has a strong positive impact on economic growth.The accelerated accumulation of physical capital accounts for more than half this effect. Enhanced technological transmissions and improvements in the quality of macroeconomic policy each account for about 20 percent of the impact of trade openness on growth. This decomposition is robust to alternative specifications and time periods. Wacziarg also successfully tests whether the empirical methodology captures all or most of the effects of trade policy on growth.The lack of statistically significant results concerning several other channels may be due to measurement problems. The black market premium may be a weak proxy for the efficiency of the price system. Moreover, international technological transmissions are very hard to measure, so there may be a downward bias in the estimates based on the manufactured exports channel, and a corresponding overstatement of other channels.This paper - a product of the Development Prospects Group, Development Economics - is part of a larger effort in the Bank to analyze the relationship between openness and economic growth.
Author: Haiying Zhao
Publisher:
ISBN:
Category :
Languages : en
Pages : 32
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Book Description
Author: Xinshen Diao
Publisher:
ISBN:
Category : Equilibrium (Economics)
Languages : en
Pages : 50
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Author: Gunnar Jonsson
Publisher: International Monetary Fund
ISBN:
Category : Business & Economics
Languages : en
Pages : 38
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Book Description
This paper examines the empirical relationship between trade and total factor productivity (TFP) in South Africa. It uses (i) a time series approach where trade is defined in terms of aggregate outcomes, i.e., as the share of imports plus exports in GDP, and (ii) a cross sectional approach, where trade is defined in terms of trade policy, i.e., as actual trade protection across different manufacturing sectors. The results indicate that there is a significant positive relationship between trade and TFP growth both over time and across sectors.
