Abstract:
Recent studies have pointed out that trade liberalisation leads to technological spillovers,
which, in turn, tend to improve the efficiency of the domestic Research and Development
(R&D) sector, and ultimately boost economic growth. In this paper, we theoretically
formalize the above mentioned relationship between trade openness and growth via
technological and knowledge spill over in the R&D sector. We show that, under certain
conditions, an increase in the degree of openness is not only growth enhancing, but also
improves the standard of living. The study, thus, prescribe policies of developing and
improving the domestic R&D sector in order to reap the full benefits of trade
liberalisation.
