The empirical evidence on the causal relationship between international trade and economic growth is inconclusive. While some studies show that trade leads to growth, others have pointed to a reverse causation. In this paper we develop a model of international trade and productivity growth in...

We consider a neoclassical growth model with risky investment projects in which a borrower's (an investor's) risk type is private information. Our innovation is to determine jointly the equilibrium loan contract and the economy's growth path and the steady state capital stock. We show that as...