A genetic game of trade, growth and externalities

Abstract

A genetic algorithm is introduced to search for optimal policies in the presence of knowledge spillovers and local pollution in a dynamic North/South trade game. Non-cooperative trade compounds inefficiencies stemming from externalities. Cooperative trade policies are efficient and yet not credible. Short of a joint maximization of the global welfare, transfer of knowledge remains as a viable route to improve world welfare. © 1998 Elsevier Science B.V. All rights reserved.