Autarky

Abstract: Using an endogenous growth model in which learning by doing, although bounded in each good, exhibits spillovers across goods, this paper investigates the dynamic effects of international trade. Examining an LDC and a DC, the latter distinguished by a higher initial level of knowledge, under autarky and free trade, I find that under free trade the LDC (DC) experiences rates of technical progress and GOP growth less than or equal (greater than or equal) to those enjoyed under autarky. Unless the LDC's population is several orders of magnitude greater than that of the DC and the initial technical gap between the two economies is not large, the LDC will be unable to catch up with its trading partner. Hence, in terms of technical progress and growth, the LDC experiences dynamic losses from trade, whilst the DC experiences dynamic gains. However, since technical progress abroad can improve welfare at home, LDC consumers may enjoy - higher intertemporal utility along the free trade path. In the case of DC consumers, as long as their economy is not overtaken by the LDC they will enjoy both more rapid technical progress and the traditional static gains from trade, and hence experience an unambiguous improvement in intertemporal welfare.

Abstract: We model the invention of new technologies and their diffusion across countries. In our model all countries grow at the same steady-state rate, with each country's productivity ranking determined by how rapidly it adopts ideas. Research effort is determined by how much ideas earn at home and abroad. Patents affect the return to ideas. We relate the decision to patent an invention internationally to the cost of patenting in a country and to the expected value of patent protection in that country. We can thus infer the direction and magnitude of the international diffusion of technology from data on international patenting, productivity, and research. We fit the model to data from the five leading research economies. A rough summary of our findings is that the world lies about two-thirds of the way from an extreme of technological autarky to an extreme of free trade in ideas. Research performed abroad is about two-thirds as potent as domestic research. Together the United States and Japan drive at least two-thirds of the growth in each of the countries in our sample.

Abstract: This paper develops a new framework for examining the determinants of wage distributions that emphasizes within-industry reallocation, labor market frictions, and differences in workforce composition across firms. More productive firms pay higher wages and exporting increases the wage paid by a firm with a given productivity. The opening of trade enhances wage inequality and can either raise or reduce unemployment. While wage inequality is higher in a trade equilibrium than in autarky, gradual trade liberalization first increases and later decreases inequality.

Abstract: In a famous passage from TheEconomic Consequences of the Peace, Keynes (1920) drew a vi\ad picture of an integrated world economy at the pinnacle of the gold standard. While sipping his morning tea in bed, Keynes reminisced nostalgically, the Englishmen of his time could order by telephone various commodities of the world, invest in far-off places, purchase unlimited amounts of foreign currency or precious metals, and arrange for international travel without even requiring a passport. Keynes, who was writing in the aftermath of a devastating world war and was anticipating a period of economic turbulence and protectionism—correctly, as it turned out—considered this a lost era of great magnificence. What will a latter-day Keynes, writing a centuiy from now, say about today's global economy wth its unparalleled prosperity and integration (illustrated by Figfure 1)? Will she bemoan, as the original Keynes did, its collapse into disarray and autarky yet again? Or will she look back at the tail end of the 20th century as the era that launched a new process of international ization? Since economists rank second only to astrologers in their predictive abilities, the correct answer is that we have no idea. The best that one can do is speculate wildly, which is what I am about to do. In these speculations, I will use the term [^international economic integration" rather tlian "globalization," for two reasons. First, while not as trendy, my preferred term has a distinct meaning that will be self-evident to economists. Globalization, by contrast, is a term that is used in different ways by different analysts. Second, the term "international economic integration" does not come with the value judge