Import substitution and economic growth

Journal of Monetary Economics, 2010, vol. 57, issue 2, 175-188

Abstract: Despite Latin America's dismal performance between the 1950s and 1980s, the region experienced strong capital deepening. We suggest that these facts can be explained as a consequence of the restrictive trade regime adopted at that time. Our framework is based on a dynamic Heckscher-Ohlin model, with scale economies in the capital-intensive sector. Initially, the economy is open and produces only the labor-intensive good. The trade regime is modeled as a move to a closed economy. The model produces results consistent with the Latin American experience. Specifically, a sufficiently small country experiences no long-run income growth, but an increase in capital.

Keywords: Trade; policy; Growth; Latin; America (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:moneco:v:57:y:2010:i:2:p:175-188

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