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Aging, transitional dynamics, and gains from trade

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  • Naito, Takumi
  • Zhao, Laixun

Abstract

We formulate a two-country, two-good, two-factor, two-period-lived overlapping generations model to examine how population aging determines the pattern of and gains from trade. Two main results are obtained. First, the aging country endogenously becomes a small country exporting the capital-intensive good, whereas the younger country endogenously dominates the world economy determining the world prices, in the free trade steady state. Second, although uncompensated free trade cannot be Pareto superior to autarky, there exists a compensation scheme applied within each country such that free trade is Pareto superior to autarky.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Economic Dynamics and Control.

Volume (Year): 33 (2009)
Issue (Month): 8 (August)
Pages: 1531-1542

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Handle: RePEc:eee:dyncon:v:33:y:2009:i:8:p:1531-1542

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Keywords: Aging and trade Gains from trade Overlapping generations model Transitional dynamics Compensation scheme;

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References

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  1. Kemp, M.C. & Wong, K.Y., 1992. "Gains from Trade with Overlapping Generations," Working Papers 92-06, University of Washington, Department of Economics.
  2. Mehdi Jelassi & Serdar Sayan, 2004. "Implications of Unequal Rates of Population Growth for Trade Revisited : Lessons from Closed Form Solutions to an Overlapping Generations General Equilibrium Model under Autarky and Trade Scenarios," Departmental Working Papers 0401, Bilkent University, Department of Economics.
  3. Fehr, Hans & Jokisch, Sabine & Kotlikoff, Laurence J., 2008. "Fertility, mortality and the developed world's demographic transition," Journal of Policy Modeling, Elsevier, vol. 30(3), pages 455-473.
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  7. Sayan, Serdar, 2005. "Heckscher-Ohlin revisited: implications of differential population dynamics for trade within an overlapping generations framework," Journal of Economic Dynamics and Control, Elsevier, vol. 29(9), pages 1471-1493, September.
  8. Kenc, Turalay & Sayan, Serdar, 2001. "Demographic shock transmission from large to small countries: An overlapping generations CGE analysis," Journal of Policy Modeling, Elsevier, vol. 23(6), pages 677-702, August.
  9. Harioka, C.Y., 1995. "A Cointegration Analysis of the Impact of the Age Structure of the Population on the Household Saving Rate in Japan," ISER Discussion Paper 0384, Institute of Social and Economic Research, Osaka University.
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Cited by:
  1. Kenji Fujiwara & Tsuyoshi Shinozaki & Akihiko Yanase, 2011. "Dynamic Interactions in Trade Policy in a Differential Game Model of Tariff Protection," Review of Development Economics, Wiley Blackwell, vol. 15(4), pages 689-698, November.
  2. Kenji Fujiwara & Tsuyoshi Shinozaki, 2010. "The Closed-Loop Effects Of Market Integration In A Dynamic Duopoly," Australian Economic Papers, Wiley Blackwell, vol. 49(1), pages 1-12, 03.
  3. Akira Yakita, 2012. "Different demographic changes and patterns of trade in a Heckscher–Ohlin setting," Journal of Population Economics, Springer, vol. 25(3), pages 853-870, July.

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