TY - JOUR
T1 - Growth and welfare effects of unilateral trade liberalization with heterogeneous firms and asymmetric countries
AU - Naito, Takumi
N1 - Funding Information:
I am grateful to the co-editor Costas Arkolakis and three anonymous referees for their helpful comments. I also appreciate JSPS (# 16K03671 ) and RIETI for the financial support. All remaining errors are mine.
Publisher Copyright:
© 2017 The Authors
Copyright:
Copyright 2017 Elsevier B.V., All rights reserved.
PY - 2017/11
Y1 - 2017/11
N2 - How do reallocations across heterogeneous firms induced by unilateral trade liberalization affect long-run growth and welfare? To answer this question, we formulate a two-country model of endogenous growth, heterogeneous firms, and asymmetric countries. The relative wage and number of domestic varieties are endogenously determined. We show that even unilateral trade liberalization can raise the balanced growth rate. Although growth-enhancing trade liberalization is always welfare-enhancing in the symmetric country case, it does not generally ensure higher long-run welfare for at most one country because of asymmetric real wage effects caused by a change in the relative number of varieties.
AB - How do reallocations across heterogeneous firms induced by unilateral trade liberalization affect long-run growth and welfare? To answer this question, we formulate a two-country model of endogenous growth, heterogeneous firms, and asymmetric countries. The relative wage and number of domestic varieties are endogenously determined. We show that even unilateral trade liberalization can raise the balanced growth rate. Although growth-enhancing trade liberalization is always welfare-enhancing in the symmetric country case, it does not generally ensure higher long-run welfare for at most one country because of asymmetric real wage effects caused by a change in the relative number of varieties.
KW - Asymmetric countries
KW - Endogenous growth
KW - Heterogeneous firms
KW - International knowledge spillovers
KW - Unilateral trade liberalization
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U2 - 10.1016/j.jinteco.2017.08.011
DO - 10.1016/j.jinteco.2017.08.011
M3 - Article
AN - SCOPUS:85037869434
SN - 0022-1996
VL - 109
SP - 167
EP - 173
JO - Journal of International Economics
JF - Journal of International Economics
ER -