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Rich and Poor Countries in Neoclassical Trade and Growth

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Deardorff, Alan V

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Abstract

A neoclassical growth model provides an explanation for a "poverty trap", "club convergence", or "twin peaks", in terms of specialisation and international trade. The model has many countries with identical linearly homogeneous technologies for producing three goods using capital and labour. With diverse initial endowments, initial equilibrium has unequal factor prices and two diversification cones. With savings out of wages, following Galor (1996), there may easily be multiple steady states. Poor countries converge to a low steady state while rich countries converge to a high one, even though all share identical technological and behavioural parameters.

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Article provided by Royal Economic Society in its journal The Economic Journal.

Volume (Year): 111 (2001)
Issue (Month): 470 (April)
Pages: 277-94
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Handle: RePEc:ecj:econjl:v:111:y:2001:i:470:p:277-94

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  1. Alejandro Cunat & Marco Maffezzoli, 2003. "The Generalized Neoclassical Growth Model," Working Papers 231, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University. [Downloadable!]
  2. Trejos, Alberto & Ferreira, Pedro Cavalcanti Gomes, 2008. "Trade in intermediate goods and total factor productivity," Economics Working Papers (Ensaios Economicos da EPGE) 676, Graduate School of Economics, Getulio Vargas Foundation (Brazil). [Downloadable!]
  3. Jaume Ventura, 2005. "A Global View of Economic Growth," NBER Working Papers 11296, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  4. Jonathan Conning & Michael Kevane, 2005. "Freedom, Servitude and Voluntary Contract," Hunter College Department of Economics Working Papers 408, Hunter College: Department of Economics. [Downloadable!]
  5. Alejandro Cunat & Marco Maffezzoli, 2004. "Neoclassical Growth and Commodity Trade," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 7(3), pages 707-736, July. [Downloadable!] (restricted)
    Other versions:
  6. Christine Greenhalgh, 2002. "Rich Man, Poor Man, Beggar Man, Thief - But Who is Who in the Capitalist Economy," Economics Series Working Papers 119, University of Oxford, Department of Economics. [Downloadable!]
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