International Trade, Natural Resource Abundance and Economic Growth Beatriz Gaitan Economics Department, University of Bern Schanzeneckstrasse 1 P.O.B. 8573 CH-3001 Bern, Switzerland E-mail address: beatriz.gaitan@vwi.unibe.ch Phone: 41 31 631 4792 Terry L. Roe * + Department of Applied Economics, University of Minnesota 231Classroom Office Building, 1994 Buford Av., St. Paul, MN 55108-6040 E-mail address: troe@apec.umn.edu Phone: 1 612 625 6706 Fax: 1 612 625 2729 Abstract: We study the role of natural-resource abundance on economic growth in a two-country Ramsey model. The countries differ only in that one is endowed with an exhaustible resource that is a necessary factor of production in both countries and in their initial stocks of capital. Conditions are shown where gains from trade lead to a natural resource curse without market distortions. The curse is shown to solely depend on technological and preference parameters. Within a resource curse setting, the larger (smaller) the capital stock of the economy poor in exhaustible resources to that of the economy rich in exhaustible resources, the larger (smaller) is the GDP growth underperformance of the country rich in exhaustible resources. These findings can help explain why the curse occurs in some countries and not others. We also show the existence of history-dependent steady-state equilibria. Key Words: Growth, exhaustible resources, depletable resources, international trade, history dependent equilibria. JEL Classification: O13, O41. * Corresponding author. + We thank Timo Trimborn, Cees Withagen, Harris Dellas and anonymous referees for their useful comments.