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Abstract

This paper provides a systematic examination and presentation of most major developments of the theory of endogenous growth and the relationship between economic growth and international trade.

The survey can be divided into two major parts. The first part covers the theory of endogenous growth for closed economies. Using a unified framework, which reduces to several models of endogenous growth in special cases, it discusses several important factors of growth that have been proposed in the literature. It emphasizes the major features of each theory and how it is different from the neoclassical theory of growth. Growth due to human capital accumulation or R&D activities has been thoroughly discussed.

While the majority of the previous work on endogenous growth focuses exclusively on closed economies, there has been work and growing interest on the growth of open economies that are linked to each other through movement of goods, factors, and/or knowledge. The second part of the survey covers the major work in the literature on growth and trade. Some of the models are direct extension of those for closed economies, but some are new ones. It is shown that trade does have important impacts on growth, and with open economies many new issues arise. However, generally many of the results are quite sensitive to the models used. The survey also covers recent work on economic growth and international factor mobility, with special attention to why international factor movement may or may not affect the convergence of the growth rates of economies.