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Convergence in a Dynamic Heckscher–Ohlin Model with Land

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  • Maria Dolores Guillo
  • Fidel Perez-Sebastian

Abstract

Convergence among nations that share the same preferences and technologies is a key result of the closed-economy neoclassical growth framework that has received substantial support in the data. However, Heckscher–Ohlin versions of the two-sector neoclassical growth model predict that nations that differ in their capital–labor ratios may not converge to the same steady state, even if they are identical in all other aspects. This is a puzzling result that warns us about potential dangers of international trade. In this paper we show that when land, an input in fixed supply, is introduced into the model, international trade in goods no longer limits the capacity of poor nations to catch up with the advanced world.

Suggested Citation

  • Maria Dolores Guillo & Fidel Perez-Sebastian, 2015. "Convergence in a Dynamic Heckscher–Ohlin Model with Land," Review of Development Economics, Wiley Blackwell, vol. 19(3), pages 725-734, August.
    • Handle: RePEc:bla:rdevec:v:19:y:2015:i:3:p:725-734
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    File URL: http://hdl.handle.net/10.1111/rode.12158
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    References listed on IDEAS

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    Cited by:

    1. Guilló, Maria Dolores & Perez-Sebastian, Fidel, 2015. "Neoclassical growth and the natural resource curse puzzle," Journal of International Economics, Elsevier, vol. 97(2), pages 423-435.
    2. Freni, Giuseppe, 2016. "Back to the Sixties: A Note on Multi-Primary-Factor Linear Models with Homogeneous Capital," MPRA Paper 73677, University Library of Munich, Germany.
    3. Vaseem Akram, 2018. "Does export diversification converge? Evidence from cross-country analysis," Economics Bulletin, AccessEcon, vol. 38(4), pages 2141-2151.

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    More about this item

    JEL classification:

    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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