Complementarity, growth, and trade

We consider an endogenous growth model with international trade in complementary capital goods. The model possesses several distinct, balanced growth solutions, which we classify using stability under adaptive learning. Some of the equilibria can involve growth rates much higher than others. We show that, in addition to a small (usually positive) effect on a given equilibrium, an expansion in trade may sometimes yield a much larger, sudden jump in growth. The small effect on the initial equilibrium may reduce growth if the opportunity cost of capital rises very fast as growth accelerates.