| Title: | Quality of Imports Relative to Exports, and the Transmission of Sustained Growth through the Terms of Trade |
| Author: | Álvarez-Albelo, Carmen D. and Pigem-Vigo,Mónica |
| Author Affiliation: | Universidad de La Laguna and CREB, Universitat de Barcelona and CREB |
| Abstract: | This paper shows that an economy can import sustained growth from abroad, in spite of not possessing mechanisms to absorb foreign technical progress. To do that, it develops a two-country model of exogenous growth with investment-specific technological change. In autarky, one country enjoys perpetual growth, while the other economy remains stagnant. In the trade situation, the terms of trade become increasingly favourable to the stagnant economy, which results in the transmission of growth. The continuous improvement in the quality of imported capital goods relative to exported consumption goods is the reason why this occurs. Moreover, countries converge in per capita income if trade is characterised by incomplete specialisation. |
© 2005 International Economic Journal |