Productive factors, such as human and physical capital, accumulate, and trade policy can affect their steady-state levels. Consequently, in addition to the usual static effects, trade liberalization has dynamic effects on output and welfare as the economy moves to its new steady state. The output impact of this dynamic effect is measurable and appears to be quite large. The welfare impact of this dynamic effect is also measurable. The size of this dynamic gain from trade depends on the wedge between social and private returns to capital. Rough numerical estimates of the output and welfare effects are provided.

tag=1 data=Are economists' traditional trade policy views still valid? by Robert E. Baldwin tag=2 data=Baldwin, Robert E. tag=3 data=Journal of Economic Literature, tag=4 data=XXX tag=6 data=June 1992 tag=7 data=804-829. tag=8 data=TRADE tag=10 data=Recent developments in trade theory have raised doubts whether economists should continue their traditional opposition to trade taxes and subsidies. tag=11 data=1992/4/11 tag=12 data=92/0735 tag=13 data=CAB

Productive factors such as human and phyaical capital are accumulated and trade can affect the steady-state levels of such factors. Consequently, trade liberalization will have dynamic effects on output and welfare as the economy moves to its new steady state, in addition to its usual static effects. The output impact of this dynamic effect is measurable and appears to be quite large. The welfare impact of this dynamic effect is also measurable. The size of this dynamic gain from trade depends on the importance of external scale economies.