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In addition to this static analysis, which compares the situation before and after a given change, a growing body of literature has identified dynamic gains from change. International trade can affect the growth process through its effect on the accumulation of capital and on technological change. Classical growth theory focuses on the effect of trade on capital accumulation via its impact on the prices of factors of production and products. The nature of trade taking place is therefore key in determining how trade affects growth. By contrast, an analytical framework that focuses on the determinants of technological progress yields different, and sometimes conflicting, conclusions on the relationship between trade and growth. Some studies suggest that the removal of trade barriers could under particular circumstances encourage specialization in sectors with low growth potential. But this conclusion is challenged by studies that capture mechanisms that associate more open trade with higher growth. Such mechanisms include increased market size, knowledge spillovers, greater competition, and improvements in the domestic institutional framework. While some studies have pointed to possible offsetting effects, many others establish strong links between growth and trade. These studies do not, however, mean that more trade means more growth. Work continues on the causal direction and true causes of this observed relationship.
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