Reducing tariffs in an endogenous growth model driven by the export sector with overlapping generations

We develop an export-sector-led endogenous growth model where people have finite horizons. There are two production sectors, export and import. We assume that the export sector is the only sector that generates technological change, through learning by doing. The knowledge then becomes available to the import sector. The government issues debt. Thus, a government deficit that results from tariff reduction is financed by debt. Government debt has a negative impact in the total output growth rate. We show that tariff reduction improves economic growth, but the presence of government debt partially nullifies this benefit.