Trade and the Neoclassical Growth Model

The model developed in this paper expands upon the traditional neoclassical exogenous growth model by facilitating a long-run growth analysis of the impact of openness to trade within a multi-country framework.Openness affects growth by impacting the extent of knowledge spillovers from abroad.This feature effectively converts the traditional closed-economy exogenous growth model into a multi-country, open-economy endogenous growth model.Nevertheless, the conditional convergence and identical growth predictions of the neoclassical model are preserved here with the extent of trade now playing a role in determining the relative heights of the countries' parallel output paths.