Open access
Date
2010-01Type
- Working Paper
ETH Bibliography
yes
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Abstract
We analyze the relative growth performance of open economies in a two-country model where different endowments of labor and a natural resource generate asymmetric trade. A resource-rich economy trades resource-based intermediates for final manufacturing goods produced by a resource-poor economy. Productivity growth in both countries is driven by endogenous innovations. The effects of a sudden increase in the resource endowment depend crucially on the elasticity of substitution between resources and labor in interme-diates production. Under substitution (complementarity), the resource boom generates higher (lower) resource income, lower (higher) employment in the resource-intensive sector, higher (lower) knowledge creation and faster (slower) growth in the resource-rich economy. The resource-poor economy adjusts to the shock by raising (reducing) the relative wage, and experiences a positive (negative) growth effect that is exclusively due to trade. Show more
Permanent link
https://doi.org/10.3929/ethz-a-005974644Publication status
publishedJournal / series
Economics Working Paper SeriesVolume
Publisher
ETH Zurich, Center of Economic Research (CER-ETH)Subject
Endogenous growth; Endogenous technological change; Natural resources; International tradeOrganisational unit
03635 - Bretschger, Lucas (emeritus) / Bretschger, Lucas (emeritus)
02045 - Dep. Geistes-, Sozial- u. Staatswiss. / Dep. of Humanities, Social and Pol.Sc.
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Is previous version of: http://hdl.handle.net/20.500.11850/160774
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ETH Bibliography
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