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ON THE OUTPUT EFFECTS OF BARRIERS TO TRADE *
Author(s) -
Ferreira Pedro Cavalcanti,
Trejos Alberto
Publication year - 2006
Publication title -
international economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.658
H-Index - 86
eISSN - 1468-2354
pISSN - 0020-6598
DOI - 10.1111/j.1468-2354.2006.00415.x
Subject(s) - economics , protectionism , total factor productivity , per capita income , productivity , international economics , poverty trap , trade barrier , dispersion (optics) , commercial policy , per capita , international trade , poverty , macroeconomics , economic growth , population , demography , physics , sociology , optics
We study the macroeconomic effects of international trade policy by integrating a Hecksher–Ohlin trade model into an optimal‐growth framework. The model predicts that a more open economy will have higher factor productivity. Furthermore, there is a “selective development trap” to which countries may or may not converge, depending on policy. Income at the development trap falls as trade barriers increase. Hence, cross‐country differences in barriers to trade may help explain the dispersion of per capita income observed across countries. The effects are quantified, and we show that protectionism can explain a relevant fraction of TFP and long‐run income differentials across countries.