Trade and Growth Mathematically Treated

The reader who is not particulary interested in mathematical derivations of various results may wish to skip this chapter without any loss of economic knowledge. However, mathematical equations bring out the interrelationships of endogenous variables into sharper focus. In this chapter we will first discuss the consequences of capital accumulation (that is, an increase in the stock of capital) in one country on the terms of trade and volume of trade. This discussion will be followed by an analysis of the consequences of technological progress in one sector of one country again on the terms of trade and volume of trade. At this stage the reader may benefit by having a quick revision of Section 3 of Chapter 9.