Globalization, Rent Protection Institutions, and Going Alone In Freeing Trade This version: November 14th 2007

Abstract: We construct a two-country North-South product cycle model of trade and non-scale growth to explore the growth and relative-wage effects of two forms of globalization – an expan-sion of the relative size of the South and unilateral trade liberalization by either country. Both Northern innovation and Southern imitation are endogenously determined. We find that the location of rent protection institutions and the sectoral trade structure determine whether or not globalization raises steady-state economic growth. We demonstrate that for accelerating worldwide economic growth, contrary to conventional wisdom, unilateral Northern trade liberalization is preferable to bilateral trade liberalization