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International Trade and Finance
Notes
2 LOVELY PROFESSIONAL UNIVERSITY
of pointing out and stressing the dynamic effects of IT. The theoretical development afforded by the
models of endogenous EG [especially after the works of Romer (1986) and Lucas (1988)], which
stimulated the creation of empirical studies, moved toward an integrated analysis of the EG and IT
theories. So, the classical tradition, apparently interrupted by the neoclassical separation of those
two areas of the theory, seems to have been recovered, assigning, as a result, a decisive role to IT on
the countries’ rate of EG.
The recognition of this importance has even led to the ceaseless appearance of proposals from
international organisations, such as the World Bank (WB) and the United Nations (UN). As a result,
many countries began to reduce commercial barriers and other controls of economic activity and
obtained a significant (and lasting) increase in the rate of EG, which suggests that extroversion has a
dynamic effect on the economy, helping to speed up the rate of EG. Moreover, the processes of economic
integration intensified.
Aims and Structuring of the Work
The EG theory analyzes, at an aggregate level, the evolution of the real product and its distribution
(intra and inter countries). In general, the models regard that product as created with a limited and
aggregate number of factors. Models which are initially designed to explain the EG of the Developed
Countries (DCs) are, in general, ‘supply side’ models because it’s admitted that, in the long-term, the
product of equilibrium is located in the proximity of the potential product, and because the latter
depends on the availability of the factors and technological level. The main objectives of those models
are to explain the variations of the factors and of the production function itself (i.e., of the way on
which the product depends on the factors) and account the effects that these variations have on the
evolution and distribution of production.
Our aim is to analyze the impact of commercial and technological effects (ignoring the financial
component), resulting from IT, on the physical accumulation of productive factors and on its
improvement (efficiency gains). In other words, in the rate of EG, during the evolution of economic
growth theory. We then underscore studies that manifestly convey the ‘effect of EG’ (changes that
modify, in a durable way, the rates of EG and its tendency in the long-term), instead of simple ‘level
effects’ (changes that influence the EG only in the short-term).
Ricardo (1817) presented a ‘dynamic model of EG’ with three forces and two
restrictions. He characterized the progressive states as having high savings, capital
accumulation, production, productivity, benefits and labour demand forcing the
increase of wages and demographic growth.
The structure which is followed in this paper observes the temporal evolution and the status that we
think commercial and technological aspects have in what concerns the EG models. In effect, it seems
to us that in the ‘classical period’ the EG and IT theories were linked (section 2), that in the ‘neoclassical
period’ there was a tendency toward their separation (section 3), and that recently, with the new
endogenous EG approaches, they were again considered jointly (section 4). Finally, in section 5 we
present the main conclusions.
1.2 Classical Period : International Trade and Growth
Since the classics don’t distinguish the questions of EG from the questions of IT, the examination of
this problem leads us to the classics’ main models of IT. However, given the aim of this work, we
attempt to advance on those models which basically discuss the ‘static gains of the IT’.
As far as the interaction between IT and EG is concerned, we found two main ideas to point out in
Smith (1776). On the one hand, IT made it possible to overcome the reduced dimension of the internal
market and, on the other hand, by increasing the extension of the market, the labour division improved
and the productivity increased. The IT would therefore constitute a dynamic force capable of