North–South Models of Growth and Trade

Abstract

The paper surveys the literature that combines growth and trade into models of North-South interaction. We distinguish two strands of growth theory: old (exogenous) and new (endogenous) growth. We also distinguish old trade theory which assumes constant returns to scale and perfect competition, and new trade theory which relaxes both of these assumptions. This gives us four possible combinations of growth and trade theories which provide the basis of the taxonomy employed in our survey. We address the following long-standing issues raised in the literature: first, given that one of the North-South asymmetries is that the North leads in technical progress, how does the South adjust to such changes? Second, can the models explain patterns of trade and income differentials between the regions? Third, do asymmetries mean that standard prescriptions on the mutual benefits of free trade and free movements of capital need to be modified? Finally, can our models explain why the South continues to favour protection of its manufacturing sectors at the same time that barriers within the North are being dismantled? JEL Classification: F43, O41

Multi-Membership and the Effectiveness of Regional Trade Agreements in Western and Southern Africa: A Comparative Study of ECOWAS and SADC

“…Indeed a North-South RTA would be more valuable if it results in technology transfer from the North to the South that starts the industrialization process in the South (Chui et al 2002). However, North-South RTAs may also impede industrialisation especially if it results in the loss of policy space to design domestic policies oriented towards flow of FDI or local industrialization (UNCTAD 2007).…”

Trade policies and development of less-favoured areas: evidence from the literature

“…Then it depends on the particular situation, which of these key elements should be stressed. 1 Often trade and growth are linked in the literature in the next section because justification of particular trade policies are derived from their growth performance (Chui et al, 2002).…”

“…Since the early 1980s, economists evidenced that productivity in some countries increases continuously, without showing declining tendencies, while many of the poor countries did not show high growth rates (Chui et al, 2002). Endogenous growth theory evolved in response to these observations.…”

Growth and Welfare Effects of World Migration

“…This deficit arises from two sources: following Chui et al (2002) the less developed East passes through different stages of development as its levels of total factor productivity and endowment of skilled labour converge to those in the West. In the North-South model of Chui et al (2002) we allow the South to engage in copying and a combination of copying and innovation of blueprints produced in the North. In this model we assume that Intellectual Property Rights (IPRs) prevail ruling out copying activity.…”