In recent years, trade economists have started to incorporate dynamics in international trade models, using frameworks that are at their core Ricardian. Using a quantitative model to estimate the effect of dynamic knowledge innovation, I argue that reducing trade barriers leads to large gains from trade as a result of these dynamics. I illustrate these effects with a quantification of the impact of trade barrier reduction between Latin American countries. Productivity levels and their distribution in space are estimated to be much greater when including the dynamic effects that result from the trade liberalization.
- Ricardian Theory
- Economic Trade
- International Trade Model
- Reduce Trade Friction
- Present Discounted Value
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Note: This chapter is based on a transcription of the presentation given at the Conference “Celebrating 200 Years of Ricardian Trade Theory” on May 12, 2017, at the University of Basel, Switzerland.
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Rossi-Hansberg, E. (2017). 200 Years of Ricardian Theory: The Missing Dynamics. In: Jones, R., Weder, R. (eds) 200 Years of Ricardian Trade Theory. Springer, Cham. https://doi.org/10.1007/978-3-319-60606-4_17
Publisher Name: Springer, Cham
Print ISBN: 978-3-319-60605-7
Online ISBN: 978-3-319-60606-4