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Paths of development for early- and late-bloomers in a dynamic Heckscher-Ohlin model

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  • Andrew Atkeson
  • Patrick J. Kehoe

Abstract

We show that in a dynamic Heckscher-Ohlin model the timing of a country’s development relative to the rest of the world affects the path of the country’s development. A country that begins the development process later than most of the rest of the world—a late-bloomer—ends up with a permanently lower level of income than the early-blooming countries that developed earlier. This is true even though the late-bloomer has the same preferences, technology, and initial capital stock that the early-bloomers had when they started the process of development. This result stands in stark contrast to that of the standard one-sector growth model in which identical countries converge to a unique steady state, regardless of when they start to develop.

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Bibliographic Info

Paper provided by Federal Reserve Bank of Minneapolis in its series Staff Report with number 256.

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Date of creation: 2000
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Handle: RePEc:fip:fedmsr:256

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Keywords: Economic development;

References

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  1. Alwyn Young, 1991. "Learning by Doing and the Dynamic Effects of International Trade," NBER Working Papers 3577, National Bureau of Economic Research, Inc.
  2. Backus, David K & Kehoe, Patrick J & Kydland, Finn E, 1994. "Dynamics of the Trade Balance and the Terms of Trade: The J-Curve?," American Economic Review, American Economic Association, vol. 84(1), pages 84-103, March.
  3. Krugman, Paul, 1987. "The narrow moving band, the Dutch disease, and the competitive consequences of Mrs. Thatcher : Notes on trade in the presence of dynamic scale economies," Journal of Development Economics, Elsevier, vol. 27(1-2), pages 41-55, October.
  4. Michele Boldrin & Jose A. Scheinkman, 1988. "Learning-By-Doing, International Trade and Growth: A Note," UCLA Economics Working Papers 462, UCLA Department of Economics.
  5. Young, Alwyn, 1991. "Learning by Doing and the Dynamic Effects of International Trade," The Quarterly Journal of Economics, MIT Press, vol. 106(2), pages 369-405, May.
  6. 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.
  7. Kiminori Matsuyama, 1990. "Agricultural Productivity, Comparative Advantage, and Economic Growth," Discussion Papers 934, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  8. Baxter, Marianne, 1992. "Fiscal Policy, Specialization, and Trade in the Two-Sector Model: The Return of Ricardo?," Journal of Political Economy, University of Chicago Press, vol. 100(4), pages 713-44, August.
  9. Robert G. King & Sergio T. Rebelo, 1989. "Transitional Dynamics and Economic Growth in the Neoclassical Model," NBER Working Papers 3185, National Bureau of Economic Research, Inc.
  10. Ventura, Jaume, 1997. "Growth and Interdependence," The Quarterly Journal of Economics, MIT Press, vol. 112(1), pages 57-84, February.
  11. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
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