Trade and growth : A survey of the endogenous growth theories

Abstract

This paper surveys the recent developments of the theory of growth particularly in the context of the interaction between international trade and growth. The endogenous growth models emphasize the beneficial effects of international trade on growth. However, some models provide evidence that in some circumstance imposition of trade barriers can increase the long run growth. The diversity of the implications of these models suggests that no simple policy recommendation should be made without a thorough understanding of the structure and key features of the economies. This study provides empirical evidence that trade has a positive impact on long run growth in Sri Lanka as predicted by the endogenous growth theory.