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

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  • 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. Gokcekus, Omer & Tower, Edward, 1998. "Does Trade Liberalization Benefit Young and Old Alike?," Review of International Economics, Wiley Blackwell, vol. 6(1), pages 50-58, February.
  2. Claustre Bajona & Timothy J. Kehoe, 2006. "Demographics in dynamic Heckscher-Ohlin models: overlapping generations versus infinitely lived consumers," Staff Report, Federal Reserve Bank of Minneapolis 377, Federal Reserve Bank of Minneapolis.
  3. Cremers, Emily T., 2005. "Intergenerational Welfare And Trade," Macroeconomic Dynamics, Cambridge University Press, Cambridge University Press, vol. 9(05), pages 585-611, November.
  4. Claustre Bajona, 2010. "Demographics in Dynamic Heckscher-Ohlin Models: Overlapping Generations versus Infinitely Lived Consumers," 2010 Meeting Papers, Society for Economic Dynamics 1172, Society for Economic Dynamics.

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