ABSTRACT
This chapter deals with the effects of economic growth. The main sources of economic growth are labor growth, capital accumulation, and technical progress. With economic growth the production-possibilities frontier shifts outward. Factor-endowment growth and technical progress give rise to some interesting economic problems the study of which forms the theory of the effects of economic growth on trade. The literature on growth makes use of some additional concepts, namely, "rates of growth" and "output elasticities." When growth does not affect the average propensity to trade, the growth is neutral. When the average propensity to trade tends to increase with growth, the growth is protrade biased. When the average propensity to trade tends to fall, the growth is antitrade biased. Increased production of exportables, like increased consumption of importables, tends to increase the volume of trade. Only ultra-antitrade-biased growth improves the growing country's terms of trade: all other types of growth tend to deteriorate them.
