The following paper relates two of the most important economic phenomena, namely economic growth and international trade. Before analysing the relationship between two economic phenomena in detail, an overview of some of the most prominent empirical empirical studies concerning the relationship between openness to international trade and economic growth in general is provided.
As most of them seem to have reached the conclusion that trade influences growth in a positive way, the question for the reasons of this presumably positive relationship arises. Factors which cause or influence economic growth in general as well as various channels through which trade might have an influence on growth are presented in the third and forth section. The importance of various sources of economic and the Solow-Model and the AK-Model are introduced in order to distinguish between long-run and short-run effects of capital accumulation, learning by doing and R&D on economic growth.
The remaining analysis concentrates on one channel in particular, namely on how
trade determines a country's import and export structure. The importance of the
range of products a country produces is enormous and affects economic growth and welfare. The fifth section introduces the static Ricardian model of comparative advantage in order to show how productivity levels dictate the patterns of trade and determine which products a country produces depending on static productivity levels at the time a country opens up to trade.
Since productivity levels do, however, not remain constant but are influenced by learning by doing and specialisation, dynamic effects of specialisation on comparative advantage should not be neglected. For this purpose, a model of dynamic comparative advantage is introduced in the sixth section. It shows how comparative advantages which exist at the time an economy opens up to trade tend to lock in and determine trade patterns in the long run. The question is raised when an economy should open up to trade and a justification of the infant industry argument is provided on theoretical grounds. The paper is concluded by a welfare analysis, which tries to answer the question under which conditions free trade or protectionist policies are best suited for a country.
Inhaltsverzeichnis (Table of Contents)
- 1 Introduction
- 2 Trade and Economic Growth The Empirical Relationship
- 2.1 General Empirical Evidence
- 3 Sources of Economic Growth
- 3.1 Capital Accumulation
- 3.2 Productivity
- 3.2.1 Solow-Model
- 3.2.2 Research & Development (R&D) - Endogenous Growth
- 3.2.3 Learning by Doing
- 3.2.4 AK-Model
- 4 Openness in Growth Theory
- 4.1 Capital Accumulation - Trade and Neoclassical Growth
- 4.2 Trade and Endogenous Growth
- 4.2.1 Research and Development (R&D)
- 4.2.2 Learning by Doing
- 5 Static Comparative Advantage
- 5.1 Supply Side
- 5.1.1 Productivity Levels
- 5.1.2 Wages
- 5.2 Demand Side
- 5.1 Supply Side
- 6 Dynamic Comparative Advantage
- 6.1 A Model of the Dynamics of Specialisation
- 6.1.1 Infant Industry Argument
- 6.1.2 The Static Model
- 6.1.3 Learning by Doing and Productivity Dynamics- Endogenous comparative advantage
- 6.1.4 Dynamic analysis
- 6.1.5 Opening up to trade - Lock-in Effects of Trade Patterns
- 6.1.6 Expanding the Market Share
- 6.2 Welfare Analysis
- 6.2.1 The Static Model
- 6.2.2 Learning and Productivity Dynamics
- 6.2.3 Welfare Analysis
- 6.2.4 Static Welfare in Autarky
- 6.2.5 Static Welfare in Free Trade
- 6.2.6 Dynamic Welfare Effects in Autarky
- 6.2.7 Dynamic Welfare Effects in Free Trade
- 6.1 A Model of the Dynamics of Specialisation
Zielsetzung und Themenschwerpunkte (Objectives and Key Themes)
This bachelor thesis examines the intricate relationship between international trade and economic growth. The objective is to analyze the potential of trade as a driver of growth and welfare, exploring both theoretical models and empirical evidence. The paper delves into the key factors that influence economic growth, including capital accumulation and productivity growth. It further investigates the role of trade in shaping growth patterns and promoting dynamic comparative advantage.
- The influence of trade on economic growth and welfare.
- Key drivers of economic growth, including capital accumulation and productivity.
- Theoretical models and empirical evidence related to the impact of trade on growth.
- The concept of dynamic comparative advantage and its implications for trade patterns.
- The relationship between trade openness and economic growth in the context of various economic models.
Zusammenfassung der Kapitel (Chapter Summaries)
The introduction sets the stage for the study by highlighting the significance of economic growth and international trade as crucial economic phenomena. It introduces the topic and outlines the paper's focus on the connection between these two elements. The empirical evidence of the relationship between trade and economic growth is explored in Chapter 2, examining prominent studies and their findings on the impact of openness to trade on economic growth. Chapter 3 delves into the key sources of economic growth, focusing on capital accumulation and productivity growth. The Solow model and the AK model are introduced to distinguish between long-run and short-run effects of capital accumulation, learning by doing, and R&D on economic growth.
Chapter 4 delves into the theoretical framework of openness in growth theory. It examines the impact of trade on capital accumulation and endogenous growth. This includes analyzing the role of research and development (R&D) and learning by doing in the context of trade-driven growth. Chapter 5 introduces the concept of static comparative advantage, examining its underlying factors on both the supply and demand sides. This includes an analysis of productivity levels and wages. Chapter 6 delves into the dynamic aspects of comparative advantage, presenting a model of specialization dynamics and exploring the effects of learning by doing and endogenous comparative advantage.
Schlüsselwörter (Keywords)
The key focus of this paper is the relationship between international trade and economic growth. The work explores various theoretical frameworks and empirical findings to understand how trade affects growth and welfare. It examines the impact of trade on capital accumulation, productivity growth, and the concept of dynamic comparative advantage. The analysis draws upon various economic models, including the Solow-Model and the AK-Model, to shed light on the complex interplay between trade and economic development. Central keywords and concepts include international trade, economic growth, welfare, capital accumulation, productivity, comparative advantage, endogenous growth, and empirical evidence.
- Quote paper
- Julia Martins (Author), 2010, Trade and Economic Growth, Munich, GRIN Verlag, https://www.grin.com/document/174154
