Trade Agreements, Bargaining and Economic Growth

33 Pages Posted: 20 Sep 2009

See all articles by Dan Peled

Dan Peled

University of Haifa - Department of Economics; National Bureau of Economic Research (NBER)

Assaf Sarid

University of Haifa

Yishay Maoz

The Open University of Israel - Department of Management and Economics

Date Written: September 2, 2009

Abstract

Rebelo's two-sector endogenous growth model is embedded within a two-country international trade framework. The two countries bargain over a trade agreement that specifies: (i) The size of the foreign aid that the richer country gives to the poorer one; (ii) the terms of the international trade that takes place after the aid is given. The aid is given not because of generosity, but because it improves the capital allocation across the world and thus raises total world production. This world production surplus enables the rich country to raise its equilibrium consumption and welfare beyond their no-aid levels. To ensure it, the rich country uses a trade agreement to condition the aid on favorable terms of trade.

Keywords: International trade, Aid, Balanced Growth, Trade Agreements

JEL Classification: F43, O41, P45

Suggested Citation

Peled, Dan and Sarid, Assaf and Maoz, Yishay, Trade Agreements, Bargaining and Economic Growth (September 2, 2009). Available at SSRN: https://ssrn.com/abstract=1466696 or http://dx.doi.org/10.2139/ssrn.1466696

Dan Peled

University of Haifa - Department of Economics ( email )

Haifa 31905
Israel

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Assaf Sarid

University of Haifa ( email )

Mount Carmel
Haifa, 31905
Israel

Yishay Maoz (Contact Author)

The Open University of Israel - Department of Management and Economics ( email )

1 University Road
Raanana, 43107
Israel
9727781891 (Phone)
97297780668 (Fax)

HOME PAGE: http://www.openu.ac.il/Personal_sites/Yishay-Maoz.html

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