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Demographics in dynamic Heckscher-Ohlin models: overlapping generations versus infinitely lived consumers

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  • Claustre Bajona
  • Timothy J. Kehoe

Abstract

This paper contrasts the properties of dynamic Heckscher-Ohlin models with overlapping generations with those of models with infinitely lived consumers. In both environments, if capital is mobile across countries, factor price equalization occurs after the initial period. In general, however, the properties of equilibria differ drastically across environments: With infinitely lived consumers, we find that factor prices equalize in any steady state or cycle and that, in general, there is positive trade in any steady state or cycle. With overlapping generations, in contrast, we construct examples with steady states and cycles in which factor prices are not equalized, and we find that any equilibrium that converges to a steady state or cycle with factor price equalization has no trade after a finite number of periods.

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Paper provided by Federal Reserve Bank of Minneapolis in its series Staff Report with number 377.

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Date of creation: 2006
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Handle: RePEc:fip:fedmsr:377

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Citations

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Cited by:
  1. Claustre Bajona & Timothy J. Kehoe, 2006. "Trade, Growth, and Convergence in a Dynamic Heckscher-Ohlin Model," NBER Working Papers 12567, National Bureau of Economic Research, Inc.
  2. Rodrigues, Mauro, 2010. "Import substitution and economic growth," Journal of Monetary Economics, Elsevier, vol. 57(2), pages 175-188, March.
  3. Chatterjee, Partha & Shukayev, Malik, 2012. "A stochastic dynamic model of trade and growth: Convergence and diversification," Journal of Economic Dynamics and Control, Elsevier, vol. 36(3), pages 416-432.
  4. Takumi Naito & Laixun Zhao, 2008. "Aging, transitional dynamics, and gains from trade," Discussion Paper Series 215, Research Institute for Economics & Business Administration, Kobe University.
  5. Partha Sen, 2012. "Capital Accumulation And Convergence In A Small Open Economy," Working papers 212, Centre for Development Economics, Delhi School of Economics.
  6. Jiandong Ju & Kang Shi & Shang-Jin Wei, 2011. "On the Connection between Intertemporal and Intra-temporal Trades," NBER Working Papers 17549, National Bureau of Economic Research, Inc.
  7. Timothy J. Kehoe & Mark J. Gibson & Kim J. Ruhl & Claustre Bajona, 2008. "Trade liberalization growth and productivity," 2008 Meeting Papers 789, Society for Economic Dynamics.
  8. Lorenzo Caliendo, 2010. "On the Dynamics of the Hecksher-Ohlin Theory," Working Papers 2010-011, Becker Friedman Institute for Research In Economics.
  9. Francois, Joseph & Shiells, Clinton R., 2008. "Dynamic Factor Price Equalization & International Convergence," CEPR Discussion Papers 7065, C.E.P.R. Discussion Papers.
  10. Emily T. Cremers, 2008. "Transfers, the Terms of Trade and Capital Accumulation," DEGIT Conference Papers c013_018, DEGIT, Dynamics, Economic Growth, and International Trade.
  11. Jiandong Ju & Shang-Jin Wei, 2007. "Current Account Adjustment: Some New Theory and Evidence," NBER Working Papers 13388, National Bureau of Economic Research, Inc.
  12. Cremers, Emily & Sen, Partha, 2009. "Transfers, the Terms of Trade and Capital Accumulation," Staff General Research Papers 34848, Iowa State University, Department of Economics.
  13. Clinton R. Shiells & Joseph F. Francois, 2008. "Dynamic Factor Price Equalization & International Income Convergence," IMF Working Papers 08/267, International Monetary Fund.
  14. Takumi Naito & Ryoji Ohdoi, 2011. "A two-country model of trade and growth with intersectoral knowledge spillovers," Journal of Economics, Springer, vol. 103(1), pages 39-58, May.

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