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1、Dynamic comparative advantage and the welfare effects of tradeBy Stephen ReddingDepartment of Economics, London School of Economics, Houghton Street, London WC2A 2AE, and CEPR; email: S.J.Reddinglse.ac.ukDeveloping economies may face a trade-off between specializing according to existing comparative
2、 advantage (in low-technology goods), and entering sectors in which they currently lack a comparative advantage, but may acquire such an advantage in the future as a result of the potential for productivity growth (in high-technology goods). Comparative advantage is endogenously determined by past t
3、echnological change, while simultaneously shaping current rates of innovation. Hence, specialization accord- ing to current comparative advantage under free trade may be welfare reducing. Selective intervention may be welfare improving, both for the economy undertaking it, and for its trade partner.
4、1. IntroductionA study by the World Bank in the 1960s expressed the view that an integrated steel mill in Korea was a premature proposition without economic feasibility (Pohang Iron and Steel Co. Ltd, 1984), p.23, cited in Amsden, 1989). A number of factors,including Koreas deficiency in the require
5、d raw materials and its small domestic market for such a scale-intensive industry, suggested that steel making was an industry in which Korea was unlikely to have a comparative advantage.1None- theless in 1973, the Korean government founded the Pohang Iron and Steel Com- pany Ltd (POSCO) with an ini
6、tial investment of $3.6bn. Government assistance in a wide variety of forms, including subsidisation of the cost of capital and invest- ments in infrastructure has been central to POSCOs development. The company soon became one of the lowest cost steel-producers in the world so that, in 1985, Korea
7、unit costs of production were less than those of Japan and around two thirds of those in the United States (Amsden, 1989), Table 12.2). By 1988, POSCO had become the eleventh largest steel company in the world, operating 80 individual plants (Enos and Park, 1988). Although at the time POSCO was foun
8、ded Korea did not appear to have a comparative advantage in the iron and steel industry, it seems incontrovertible that it now does and that the Korean government has played a central role in its acquiring one. This paper investigates the idea that developing economies may face# Oxford University Pr
9、ess 1999Oxford Economic Papers 51 (1999), 153915. 1See, for example, Amsden (1989, Ch. 12) on which the first two paragraphs of this section draw.a trade-off between specialising according to an existing pattern of comparative advantage (often in low-technology industries) and entering sectors in wh
10、ich they currently lack a comparative advantage, but may acquire such an advantage in the future as a result of the potential for productivity growth (e.g. high-technology industries). We analyse the circumstances under which the actions of private sector agents will resolve this trade-off between c
11、urrent and future patterns of comparaive advantage optimally. If the trade-off is not resolved optimally, then it becomes possible for free trade to be welfare reducing. Moreover, protectionist measures that induce specialisation in sectors where one does not currently have a compara- tive advantage
12、 may be welfare increasing. This paper investigates these ideas within a general equilibrium model of endo- genous growth, in which an economys pattern of international trade and rate of economic growth are jointly and endogenously determined. The paper is part of a wider literature concerned with t
13、he relationship been trade and growth. On the one hand, Krugman (1981) examines the effect of international trade upon the world distribution of income when there are external economies to physical capital accumulation in the manufacturing sector. On the other hand, early formalisations of the inter
14、-relationship between patterns of international trade and rates of tech- nological change include Krugman (1987) and Lucas (1988), although neither paper undertakes a welfare analysis. More recently, (Grossman and Helpman, 1990, 1991), (Rivera-Batiz and Romer 1991a, 1991b) and (Taylor 1991, 1994) ha
15、ve examined the relationship betweentrade and growth, when endogenous growth is the result of profit-seeking invest- ments in Research and Development (Rch? ? c?zc1? hwhere 0 0 for j ? z;h. Following Krugman (1987) and Lucas (1988), we assume that while producing output in a given sector, agents acq
16、uire productivity-enhancing production experi- ence Kj(or learn by doing). For example, through trial and error, new methods of manufacture or new ways of organising existing processes are discovered. The rate at which this production experience is acquired is assumed to depend upon theflow of labour employed in producin
