ABSTRACT

Chapters 3 through 6 presented a historical sequence of growthmodels. It is clear that by introducing international trade into thesemodels, logical and consistent explanations for the positive relationship between trade and economic growth found in statistical studies can be pieced together. The combination of dynamic theoretical arguments and the large amount of empirical evidence greatly strengthens the case for free trade, compared to the traditional static theoretical arguments economists have always employed to make their case for free trade. We cannot yet feel fully confident in our dynamic theoretical and empirical case for free trade, however. The previous chapter pointed out some exceptions to the theoretical conclusions. Chapter 2 explained some doubts about the empirical results supporting the pro-growth role of free trade. Recall, for example, the theoretical discussion of the effect of international competition on innovation and Dani Rodrik’s criticism of the empirical results of studies linking trade and growth. This chapter extends our analysis of the growth models by examining the explicit and implicit assumptions on which they are based. Are there plausible changes in these assumptions that would result in the conclusion that international trade slows long-run economic growth?