The research for this project was carried out while the author was at the staff of the Economics Faculty of Erasmus University Rotterdam. The core results were recorded in discussion papers 7821/G, 7901/G, 7910/G and 8002/G of the faculty's Institute for Economic Research. Working on the project I incurred considerable debts to some professors and fellow staff members of the faculty. Professor P. J. Verdoorn initiated this study by suggesting its subject and by encouraging me to turn my initially hesitantly held view of imports as 'indispensable' inputs into the cornerstone of the analysis; he also read the final manuscript. Professor H. C. Bos' enthusiastic encouragement greatly stimulated me in the arduous phase of the writing of the manuscript; his advise on style and emphasis considerably improved the presentation while his careful reading of the various versions of the manuscript eliminated many non sequiturs and some errors. I am deeply in debt to A. S. W. de Vries who scrutinized not only the manuscript but also the preliminary discussion papers; while sharing an office room with him for six years I had the benefit of many stimulating discussions and he equanimously put up with my moods when I was stuck at some point. I am also in debt to D. P. Broer for checking and improving the optimal control theorem in chapter 7; to Professor R. Harkema for inducing me to write sections 5. 1 and 5.

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One. Introduction.- 1.1. Approach.- 1.2. Plan of the Book and Results.- Two. The Long-Run Growth Rate in Alternative Theories of Trade and Growth: A Survey of the Literature.- 2.1. The Two-Sector Neoclassical Theory: the Basic Model.- The model.- The small-country case.- The two-country system.- Conclusion.- 2.2. Extensions and Variations of the Basic Neoclassical Model.- Alternative saving behaviour.- Both sectors' goods can be consumed.- Transport costs.- Intermediate goods.- Dated capital goods: vintage models.- Relaxing balance of trade equilibrium.- Conclusion.- 2.3. Two-Sector Growth with Complementarity in Production.- 2.4. Growth with Indispensable Imports.- Complementarity of imports.- Substitutability of imports and domestic factors.- 2.5. An Alternative Theory? The Neo-Ricardian Approach.- The growth rate.- The steady-state method.- Three, Imports as an Indispensable Factor of Production.- 3.1. Imperfect Substitutability of Imports.- Indispensability of imports caused by specific non-traded factors.- The role of innovation and technological improvements.- Indispensability of imports caused by adjustment costs.- Conclusion.- 3.2. Imports as an Input.- 3.3. The Production Function.- Properties of the production function.- Separability.- Share and elasticity functions.- The production function at extreme factor ratios.- 3.4. Import Demand.- Profit maximization with non-constant returns.- Cost minimization with output constraint.- Second-order conditions.- 3.5. Defining a Corresponding Autarkic Economy.- Appendix 3.1. Tables 3.1 and 3.2, Methods and Sources.- Appendix 3.2. Derivatives and Allen Partial Elasticities of Substitution of a Separable Function.- Appendix 3.3. The Transitional Production Function.- Four. Economic Growth in Economies of Moderate Size: The Case of Free Trade and Separability of Imports and Domestic Factors..- 4.1. Basic Relations and Assumptions.- 4.2. Direction of the Evolution of the Capital-Labour Ratio.- Non-constancy of the capital-labour ratio under steady growth of capital.- Long-run growth of the capital-labour ratio.- Long-run decline of the capital-labour ratio.- Trade and national limits to growth.- 4.3. A Steady-Growth Theorem.- 4.4. The Influence of International Circumstances and Technology on the Long-Run National Growth Rate.- Foreign-demand growth.- The terms of trade elasticity of foreign demand.- The rate of growth of labour, labour's share in domestic factors and the elasticity of capital-labour substitution.- Technical progress and the rate of returns to scale.- Imports' share and the elasticity of substitution between imports and domestic factors.- Summary of conclusions.- 4.5. Practical Interpretation and Policy Implications.- The rate of growth of foreign demand.- The terms of trade elasticity of foreign demand.- Import substitution and export-led growth.- Appendix 4.1. Steady Growth under Unfavourable Conditions of Trade and Stagnating Technical Progress.- Appendix 4.2. Parameter Variations and the Steady-Growth Rate.- Five. Economies of Moderate Size: Consequences of Tariffs and Non-Separability of Imports and Domestic Factors.- 5.1. Non-Separability of Imports and Domestic Factors.- Formulation of the model without separability assumption.- The capital-labour ratio in the long run.- A steady-growth theorem.- Interpretation of the steady-growth theorem.- 5.2. Effects of Import Duties.- Short-run consequences of tariffs: optimum duties 166 Independence of the long-run growth rate of import duties.- Effects of duties on the level of income.- Consequences of an alternative specification of import demand.- 5.3. Non-Separability and Import Duties.- Appendix 5.1. Optimum Duties and Steady Growth of Cobb-Douglas Economies.- Six. Transmission and Generation of Growth by North-South Trade.- 6.1. Equilibrium Trade.- 6.2. Direction of the Evolution of the Capital-Labour Ratios.- Non-constancy of the capital-labour ratios under steady growth of both regions' capital stocks.- Growth of the capital-labour ratios.- 6.3. A Steady-Growth Theorem.- 6.4. Determinants of the North's and South's Long-Run Growth Rates.- The rates of technical progress.- The natural rates.- The rates of returns to scale.- Labour's shares.- The import shares.- Summary and conclusions.- 6.5. Implications.- The growth of the north-south system, 1955-1979.- North-south trade and the south's growth rate, 1955-1979.- Impact of the south's development on the growth of the north, 1980-2050.- Appendix 6.1. Parameter Variations and the Steady-Growth Rates.- Appendix 6.2. Sources of Tables 6.7, 6.8 and 6.9.- Seven. North-South Aid and the North'S Income.- 7.1. The Transfer Problem.- 7.2. North-South Aid: a Tertiary Blessing for the North.- Modelling a north-south transfer.- The tertiary effects of a north-south transfer.- 7.3. The Trajectory of North-South Aid Maximizing the North's Consumption.- An optimal aid and investment theorem.- Proof of the optimal-path theorem.- Appendix 7.1. The Transfer Effect and the Capital Stocks.- Eight. Stability of The Goods Market and the Balance of Trade When Imports are Indispensable Inputs.- 8.1. Stability of the Goods Market with Balanced Trade.- Treatment in the literature.- The case where imports are indispensable inputs.- 8.2. Stability of the Balance of Trade.- Notes.- References.- List of Main Symbols.- Author Index.