Import substitution and economic growth |
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Authors: | Mauro Rodrigues |
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Institution: | Department of Economics, University of Sao Paulo, Av. Prof. Luciano Gualberto 908, Sao Paulo, SP, 05508-900, Brazil |
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Abstract: | Despite Latin America's dismal performance between the 1950s and 1980s, the region experienced strong capital deepening. We suggest that these facts can be explained as a consequence of the restrictive trade regime adopted at that time. Our framework is based on a dynamic Heckscher-Ohlin model, with scale economies in the capital-intensive sector. Initially, the economy is open and produces only the labor-intensive good. The trade regime is modeled as a move to a closed economy. The model produces results consistent with the Latin American experience. Specifically, a sufficiently small country experiences no long-run income growth, but an increase in capital. |
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Keywords: | Trade policy Growth Latin America |
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