Growth Due To Globalization*

Abstract

This article presents a growth model including geographical space and transportation costs in which the geographical area where firms sell their product is endogenous. Growth is generated by the expansion of trade and there is a positive relationship between degree of openness and income level. The model explains why economies become increasingly more open and why the degree of openness is not robustly correlated with growth. In contrast to other growth models, investment in transport infrastructure plays an important role and the size of the country does not affect growth.

Foreign Direct Investment, Trade Openness and Economic Growth in Ghana: An Empirical Investigation

“…The theoretical link between trade openness and economic growth has been well documented in the literature (see for example Grossman & Helpman, 1990Rivera-Batiz & Romer, 1991;Ben-David & Loewy 2000Perera-Tallo, 2003). Generally speaking, the theoretical argument has been that trade liberalization and/or outer-oriented trade strategies, and hence trade openness is good for growth (see Krueger, 1998).…”

Two way Panel Causality Analysis for Degree of Trade Openness and Size of City

“…Though openness-growth relationships grabbed the attention of various researchers in the existing literature, causal connection between the two was unduly ignored. Degree of trade openness is determined by the level of income hence there might exist a possibility of long run causal connection between the two [36]. The study on China shows bicausality in export and growth [33].…”

Geographical Space and Effective Demand Under Stagnation

“…This paper applies the idea of stagnation in Ono (2001) and combines it with Perera-Tallo's (2003) model of a spatial setting to consider a spatial economy with stagnation. We require that all households throughout the location have identical preferences, and all firms have identical technologies.…”

“…Ono (2001) examines the effective demand effect of a changing growth rate of money supply. 7 See the appendix in Perera-Tallo (2003) for a more detailed derivation of (17). 8 Naturally, when full employment holds, that is L = 1, (18) yields W/W = 0, ∀ α.…”

“…However, Ono (2001) ignored the adjustment mechanism between geographical space and effective demand, because geographical space was not considered in his model. This paper takes the idea of stagnation in Ono (2001) and combines it with the spatial model of Perera-Tallo (2003). This combination implies that the production side of the model is more complicated than in the Ono model.…”