Working Paper
TFP, Capital Deepening, and Gains from trade
Abstract: We study welfare gains from trade in a dynamic, multicountry model with capital accumulation. We compute the exact transition paths for 93 countries following a permanent, uniform, unanticipated trade liberalization. We find that while the dynamic gains are different across countries, consumption transition paths look similar except for scale. In addition, dynamic gains accrue gradually and are about 60 percent of steady-state gains for every country. Finally, the contribution of capital accumulation to dynamic gains is four times that of TFP.
Keywords: dynamic gains from trade; capital deepening; total factor productivity;
JEL Classification: E22; F11; O11;
https://doi.org/10.20955/wp.2022.034
Status: Published in Federal Reserve Bank of St. Louis Review
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Bibliographic Information
Provider: Federal Reserve Bank of St. Louis
Part of Series: Working Papers
Publication Date: 2022-09-27
Number: 2022-034
Note: Publisher DOI: https://doi.org/10.20955/r.105.150-76