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Short-run and Long-run Welfare Implications of Free Trade

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Author Info

  • Pablo Serra

Abstract

The author considers a two-factor (capital and labor), two-good (consumption and investment goods), one-country, overlapping-generations model. For the case in which the closed economy follows an efficient path, the author proves, that if trade lowers (raises) the relative price of the capital-intensive good, the current old people, who only own capital, lose (gain) from the opening of the economy, while all subsequent generations, whose only endowment is labor, benefit (lose) from it. It is also shown that the country gains from trade in the sense that the generations made better off by trade can compensate those that lose from the opening of the economy.

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Bibliographic Info

Article provided by Canadian Economics Association in its journal Canadian Journal of Economics.

Volume (Year): 24 (1991)
Issue (Month): 1 (February)
Pages: 21-33

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Handle: RePEc:cje:issued:v:24:y:1991:i:1:p:21-33

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Cited by:
  1. Claustre Bajona, 2010. "Demographics in Dynamic Heckscher-Ohlin Models: Overlapping Generations versus Infinitely Lived Consumers," 2010 Meeting Papers 1172, Society for Economic Dynamics.
  2. Cremers, Emily T., 2005. "Intergenerational Welfare And Trade," Macroeconomic Dynamics, Cambridge University Press, vol. 9(05), pages 585-611, November.
  3. Gokcekus, Omer & Tower, Edward, 1996. "Does Trade Liberalization Benefit Young and Old Alike?," Working Papers 96-35, Duke University, Department of Economics.
  4. Claustre Bajona & Timothy J. Kehoe, 2006. "Demographics in dynamic Heckscher-Ohlin models: overlapping generations versus infinitely lived consumers," Staff Report 377, Federal Reserve Bank of Minneapolis.

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