Economic Growth in Economies Of Moderate Size: The Case of Free Trade and Separability of Imports and Domestic Factors

Abstract

In this chapter we investigate the consequences for the economic growth of individual countries of the two central features of modern international trade emphasized in the preceding chapter: the bulk of trade is in intermediates, and imports are indispensable. The first section explains the basic relations and assumptions. These have been selected so as to be applicable to most modern economies: the country they describe is neither very ‘large’ in the sense that it is capable of influencing the growth rate of world trade, nor so’ small’ that it faces given terms of trade. Hence the term ‘economy of moderate size’ is adopted.