Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/171567
Authors: 
Peretto, Pietro F.
Valente, Simone
Year of Publication: 
2010
Series/Report no.: 
Economics Working Paper Series 10/124
Abstract: 
We analyze the relative growth performance of open economies in a two-country model where different endowments of labor and a natural resource generate asymmetric trade. A resource-rich economy trades resource-based intermediates for final manufacturing goods produced by a resource-poor economy. Productivity growth in both countries is driven by endogenous innovations. The effects of a sudden increase in the resource endowment depend crucially on the elasticity of substitution between resources and labor in interme- diates' production. Under substitution (complementarity), the resource boom generates higher (lower) resource income, lower (higher) employment in the resource-intensive sector, higher (lower) knowledge creation and faster (slower) growth in the resource-rich economy. The resource-poor economy adjusts to the shock by raising (reducing) the relative wage, and experiences a positive (negative) growth effect that is exclusively due to trade.
Subjects: 
Endogenous Growth
Endogenous Technological Change
Natural Resources
International Trade
JEL: 
E10
F43
L16
O31
O40
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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