ABSTRACT
The theoretical literature on growth and trade flourished in the 1950s and 1960s, and Bo Södersten contributed handsomely to this. The literature first developed a framework for analysing the comparative statics of the effects of capital accumulation and exogenous technical change on a country’s terms of trade and balance of payments. Then in the second half of the 1960s the dynamic analysis of neoclassical growth models was extended to the case of the open economy. In the 1970s and almost up to the end of the 1980s the theoretical literature on growth and trade was somewhat inactive, except for the development of several NorthSouth models focusing on the impact on trade relationships of the various kinds of asymmetries between rich and poor countries (primarily in the structure of demand for importables and exportables, or in the labour markets). In the last few years there has again been a spurt in the literature flowing from the application of the so-called new growth theory following upon the leading contributions of Romer (1986, 1990) and Lucas (1988). The book by Grossman and Helpman (1991) is a major example of this application to an open economy.
