Optimal Accumulation in a Listian Model
The most respectable of the traditional arguments against the classical doctrine of free trade has been the “infant industry” argument of Hamilton1 and List2, which appeals to dynamic considerations ignored in the classical comparative statics analysis. It is natural to re-examine this controversy in the light of recent advances in the dynamic analysis of economic growth. In another essay3 I examined a model of optimal patterns of investment and foreign trade in a two-sector growth model. In that model, however, there was no provision for an “infant industry”; hence, the restrictions on trade resulted not from dynamic considerations of optimal growth, but rather from essentially static considerations of monopoly power. The purpose of this paper is to develop an optimal growth model which exhibits the essential feature of the Listian model — the effect of foreign trade on endogenous technical change.
KeywordsStationary Point Optimal Path Advanced Country Investment Good Stable Node
Unable to display preview. Download preview PDF.
- 1.Alexander Hamilton, Report on the Subject of Manufactures, 1791; reprinted in The Papers of Alexander Hamilton, Vol X, Harold C. Syrett, ed., Columbia University Press, New York, 1966, pp. 230–340.Google Scholar
- 3.Harl E. Ryder, Jr., “Optimal Accumulation and Trade in an Open Economy of Moderate Size”, Essays on the Theory of Optimal Economic Growth, Karl Shell, ed., M.I.T. Press, Cambridge, Massachusetts, 1967, pp. 87–116.Google Scholar
- 6.J.E. Meade, Trade and Welfare, Oxford University Press, London, 1955, p. 256.Google Scholar