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Factor Accumulation and Trade: Dynamic Comparative Advantage with Endogenous Physical and Human Capital

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  • Eric W. Bond
  • Kathleen Trask
  • Ping Wang

Abstract

This article develops a two-country endogenous growth model with accumulation of both physical and human capital. We establish the existence of two-country balanced growth equilibria with physical and human capital in which a static and dynamic version of the Heckscher-Ohlin (HO) hypothesis hold true. We also show the existence of unbalanced growth equilibria in which the static and dynamic HO hypotheses can be violated. The multiplicity of paths with international trade emerge as a result of the intertemporal no-arbitrage condition when factor prices are equalized across countries. Copyright 2003 By The Economics Department Of The University Of Pennsylvania And Osaka University Institute Of Social And Economic Research Association.

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Bibliographic Info

Article provided by Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association in its journal International Economic Review.

Volume (Year): 44 (2003)
Issue (Month): 3 (08)
Pages: 1041-1060

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Handle: RePEc:ier:iecrev:v:44:y:2003:i:3:p:1041-1060

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  1. Eric W. Bond & Ping Wang & Chong K. Yip, 1993. "A general two-sector model of endogenous growth with human and physical capital: balanced growth and transitional dynamics," Research Paper 9324, Federal Reserve Bank of Dallas.
  2. Nancy L. Stokey, 1990. "Human Capital, Product Quality, And Growth," NBER Working Papers 3413, National Bureau of Economic Research, Inc.
  3. Nancy L. Stokey & Sergio Rebelo, 1993. "Growth Effects of Flat-Rate Taxes," NBER Working Papers 4426, National Bureau of Economic Research, Inc.
  4. Ellis W. Tallman & Ping Wang, 1990. "Human capital and endogenous growth: evidence from Taiwan," Working Paper 90-9, Federal Reserve Bank of Atlanta.
  5. Barro, Robert J, 1991. "Economic Growth in a Cross Section of Countries," The Quarterly Journal of Economics, MIT Press, vol. 106(2), pages 407-43, May.
  6. Jones, Larry E & Manuelli, Rodolfo E, 1990. "A Convex Model of Equilibrium Growth: Theory and Policy Implications," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 1008-38, October.
  7. Rebelo, Sergio, 1991. "Long-Run Policy Analysis and Long-Run Growth," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 500-521, June.
  8. Paul M. Romer, 1989. "Human Capital And Growth: Theory and Evidence," NBER Working Papers 3173, National Bureau of Economic Research, Inc.
  9. Findlay, Ronald & Kierzkowski, Henryk, 1983. "International Trade and Human Capital: A Simple General Equilibrium Model," Journal of Political Economy, University of Chicago Press, vol. 91(6), pages 957-78, December.
  10. Stiglitz, Joseph E, 1970. "Factor Price Equalization in a Dynamic Economy," Journal of Political Economy, University of Chicago Press, vol. 78(3), pages 456-88, May-June.
  11. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
  12. Stokey, Nancy L, 1996. " Free Trade, Factor Returns, and Factor Accumulation," Journal of Economic Growth, Springer, vol. 1(4), pages 421-47, December.
  13. Trefler, Daniel, 1993. "International Factor Price Differences: Leontief Was Right!," Journal of Political Economy, University of Chicago Press, vol. 101(6), pages 961-87, December.
  14. Caballe, Jordi & Santos, Manuel S, 1993. "On Endogenous Growth with Physical and Human Capital," Journal of Political Economy, University of Chicago Press, vol. 101(6), pages 1042-67, December.
  15. Ronald Findlay, 1995. "Factor Proportions, Trade, and Growth," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262061759, December.
  16. Deardorff, Alan V & Hanson, James A, 1978. "Accumulation and a Long-Run Heckscher-Ohlin Theorem," Economic Inquiry, Western Economic Association International, vol. 16(2), pages 288-92, April.
  17. Findlay, Ronald, 1970. "Factor Proportions and Comparative Advantage in the Long Run," Journal of Political Economy, University of Chicago Press, vol. 78(1), pages 27-34, Jan.-Feb..
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