Agricultural Productivity, Infrastructures and the Optimal Timing of Opening Trade

This study develops a dynamic Ricardian trade model that incorporates productive infrastructures into the manufacturing sector. The costs of building infrastructures are financed by tax. We investigate the relationship between the timing of opening trade and total welfare. The main results are as follows: (1) there is the optimal tax rate maximizing the total welfare; (2) an increase in agricultural productivity can accelerate the timing of opening trade, which, however, does not necessarily improve total welfare; and (3) total welfare under specialization in manufacturing can be higher than that under specialization in agriculture depending on the prevailing conditions