The Long-run Trade Pattern in a Growing Economy

We analyze the determinants of the trade pattern in a two-country growing economy. The long-run trade pattern depends on the structure of the absolute advantage as well as the comparative advantage, because the absolute advantage determines the terms of trade and the value of the marginal product of capital which affect the growth rate in our model. Moreover, we find that opening trade reduces or removes the difference in the growth rates of the two countries when the country lagging in the growth rate has a comparative advantage in a consumption commodity. Received June 18, 2001; revised version received July 16, 2002 Published online: April 30, 2003