S-Space College of Social Sciences (사회과학대학) Institute of Economics Research (경제연구소) Seoul Journal of Economics Seoul Journal of Economics vol.29 no.1/4 (2016)
Austrian Model of Trade and Growth of a Developing Economy
- Kim, Shin-Haing
- Issue Date
- Seoul Journal of Economics, Vol.29 No.2, pp. 235-268
- This paper develops a model of trade and growth for a developing
economy based on the Austrian theory of capital. Two types of economies
differ in terms of time preference rates. Each economy produces
two capital goods, both of which provide services to consumers
through their life periods. A human capital intensive capital good is
produced by a relatively more roundabout method than less human
capital intensive one. An economy with a low time preference rate
exports a human capital intensive capital good to a high time preference
rate economy. By importing a human capital intensive capital
good and investing for a low vintage level of domestic human capital
to the high vintage of the imported capital good, the growth rate of
the high time preference rate economy increases. Another aspect of
the Austrian trade model is to interpret the export of the consumer
goods of a developing economy as the export of the domestic savings
to finance the import of the capital good from the advanced economy.
Trade contributes to the growth of the developing economy.
Thus, the Austrian trade model exhibits the financial side of trade
in the early stage of development.