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| Author: | Devereux, M. B. |
| Title: | Growth, specialization, and trade liberalization |
| Journal: | International Economic Review
1997 : AUG, VOL. 38:3, p. 565-585 |
| Index terms: | TRADE LIBERALISM GROWTH SPECIALIZATION |
| Language: | eng |
| Abstract: | This article explores a two-way interaction between economic growth and trade liberalization. International trade can increase world growth rates through increasing returns to specialization, but growth alters patterns of comparative advantage, changing the incentives to levy tariffs in a dynamic tariff game. The article analyzes two types of equilibria: in a trade liberalization equilibrium growth rates are high, tariffs are low and falling, the trade ratio is higher, and is increasing over time; in a tariff war equilibrium growth rates are low, tariffs are high and rising, the ratio of exports to income, the trade ratio, is low, and falls to zero asymptotically. |
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