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Path Interdependence Among Early and Late Bloomers in a Dynamic Heckscher-Ohlin Model

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  • Gaitan, Beatriz
  • Roe, Terry L.

Abstract

The closed economy neoclassical growth model predicts convergence to a capital stock level that is independent of its initial level, suggesting that discrepancies in per capita income among the world’s economies should largely disappear in the long-run. This paper shows that international trade among countries differing only in their level of initial capital is sufficient to generate long-run income differences across countries. The long-run level of capital of the country most initially endowed with capital is shown to exceed the level of capital otherwise obtained in autarchy while the country least endowed converges to a capital stock lower than would otherwise be obtained in autarchy.

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Bibliographic Info

Paper provided by University of Minnesota, Economic Development Center in its series Bulletins with number 7183.

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Date of creation: 2007
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Handle: RePEc:ags:umedbu:7183

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Related research

Keywords: International trade; Development; Multiple Equilibria; International Relations/Trade; O41; F43; F11;

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References

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  1. Francisco Rodriguez & Dani Rodrik, 1999. "Trade Policy and Economic Growth: a Skeptic's Guide to the Cross-National Evidence," Working Papers 9912, Economic Research Forum, revised Apr 1999.
  2. Daron Acemoglu & Jaume Ventura, 2002. "The World Income Distribution," The Quarterly Journal of Economics, MIT Press, vol. 117(2), pages 659-694, May.
  3. 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.
  4. Galor, Oded, 2004. "From Stagnation to Growth: Unified Growth Theory," CEPR Discussion Papers 4581, C.E.P.R. Discussion Papers.
  5. Zhiqi Chen, 1992. "Long-Run Equilibria in a Dynamic Heckscher-Ohlin Model," Canadian Journal of Economics, Canadian Economics Association, vol. 25(4), pages 923-43, November.
  6. Mountford, Andrew, 1998. "Trade, convergence and overtaking," Journal of International Economics, Elsevier, vol. 46(1), pages 167-182, October.
  7. Andrew Atkeson & Patrick J. Kehoe, 2000. "Paths of development for early- and late-bloomers in a dynamic Heckscher-Ohlin model," Staff Report 256, Federal Reserve Bank of Minneapolis.
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Cited by:
  1. Wolfgang Lechthaler & Mariya Mileva, 2013. "Two-Country Dynamic Model of Trade with Heterogeneous Firms and Comparative Advantage," WWWforEurope Working Papers series 12, WWWforEurope.
  2. Lorenzo Caliendo, 2010. "On the Dynamics of the Hecksher-Ohlin Theory," Working Papers 2010-011, Becker Friedman Institute for Research In Economics.
  3. Taketo Kawagishi & Kazuo Mino, 2013. "Time Preference and Income Convergence in a Dynamic Heckscher-Ohlin Model," KIER Working Papers 880, Kyoto University, Institute of Economic Research.
  4. Wolfgang Lechthaler & Mariya Mileva, 2013. "Trade Liberalization and Wage Inequality: New Insights from a Dynamic Trade Model with Heterogeneous Firms and Comparative Advantage," Kiel Working Papers 1886, Kiel Institute for the World Economy.

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