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Neoclassical Growth and Commodity Trade

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  • Cuñat, Alejandro
  • Maffezzoli, Marco

Abstract

We construct and numerically solve a dynamic Heckscher-Ohlin model in which the initial distribution of production factors in the world makes worldwide factor price equalization impossible, and leads countries to group in two diversification cones. We study the dynamics of income per capita and factor prices. Our results suggest that the Ramsey model under complete specialization overcomes several shortcomings of its autarky and factor price equalization counterparts. In comparison with the autarky model, for example, it can produce similar transitional dynamics and account for important cross-sectional differences in the levels and growth rates of income per capita while generating much smaller rental-rate differentials across countries. Moreover, it does not necessarily yield convergence in levels for identically parameterized economies. All in all, the Ramsey/Complete Specialization model seems to provide a better benchmark from which to depart when studying the dynamic behaviour of countries and cross-sectional differences in income per capita levels and growth rates.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 3322.

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Date of creation: Apr 2002
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Handle: RePEc:cpr:ceprdp:3322

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Keywords: convergence; economic growth; heckscher-Ohlin; international trade; simulation;

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References

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Citations

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Cited by:
  1. Alejandro Cuñat & Marco Maffezzoli, . "Trade Integration and Growth," Working Papers 220, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  2. Jaume Ventura, 2005. "A global view of economic growth," Economics Working Papers 849, Department of Economics and Business, Universitat Pompeu Fabra.
  3. Partha Chatterjee & Malik Shukayev, 2008. "A Stochastic Dynamic Model of Trade and Growth: Convergence and Diversification," DEGIT Conference Papers c013_034, DEGIT, Dynamics, Economic Growth, and International Trade.
  4. 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.
  5. Lars Calmfors & Giancarlo Corsetti & Seppo Honkapohja & John Kay & Gilles Saint-Paul & Hans-Werner Sinn & Jan-Egbert Sturm & Xavier Vives, 2006. "Chapter 2: Global Imbalances," EEAG Report on the European Economy, CESifo Group Munich, CESifo Group Munich, vol. 0, pages 50-67, 03.
  6. Alejandro Cunat & Marco Maffezzoli, 2005. "Can comparative advantage explain the growth of US trade?," LSE Research Online Documents on Economics, London School of Economics and Political Science, LSE Library 19919, London School of Economics and Political Science, LSE Library.
  7. Petros Milionis, 2012. "Long-Run Development in the Open Economy," DEGIT Conference Papers c017_059, DEGIT, Dynamics, Economic Growth, and International Trade.
  8. Lutz Arnold, 2007. "A generalized multi-country endogenous growth model," International Economics and Economic Policy, Springer, vol. 4(1), pages 61-100, April.
  9. Leimbach, Marian & Edenhofer, Ottmar, 2007. "Technological spillovers within multi-region models: Intertemporal optimization beyond the Negishi approach," Economic Modelling, Elsevier, vol. 24(2), pages 272-294, March.
  10. Claustre Bajona & Timothy J. Kehoe, 2008. "Trade, growth, and convergence in a dynamic Heckscher-Ohlin model," Staff Report, Federal Reserve Bank of Minneapolis 378, Federal Reserve Bank of Minneapolis.
  11. Batista, Catia & Potin, Jacques, 2008. "International Specialization and the Return to Capital, 1976-2000," ESSEC Working Papers DR 08001, ESSEC Research Center, ESSEC Business School.
  12. Catia Batista & Jacques Potin, 2007. "Heckscher-Ohlin Specialization and the Marginal Product of Capital, 1976-2000," Economics Series Working Papers 357, University of Oxford, Department of Economics.

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