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Can Openness Help Make a Miracle?

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Abstract

Several empirical studies indicate that there is a positive relationship between openness to international trade and growth. Lucas (1988) argues that this relationship poses a paradox for neo-classical theory because trade liberalisation produces only limited level effects, not long-run growth effects, in neo-classical growth models. This paper attempts to resolve Lucas’ paradox by adding production sectors to the basic one-sector Solow model. This paper demonstrates that these multi-sector models are consistent with the empirical links between openness and growth. These models also blur the traditional distinctions between exogenous and endogenous growth theory. As a result, they substantially complicate the task of discriminating between exogenous and endogenous growth episodes in empirical data.

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  1. Keble College, University of Oxford, Parks Rd, Oxford, OX1 3PG, United Kingdom

    Brett House

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House, B. Can Openness Help Make a Miracle?. De Economist 148, 167–203 (2000). https://doi.org/10.1023/A:1004061128422

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