Aging, transitional dynamics, and gains from trade
AbstractWe formulate a two-country, two-good, two-factor, two-period-lived overlapping generations model to examine how population aging determines the pattern of and gains from trade. We obtain two main results. First, the aging country endogenously becomes a small country exporting the capital-intensive good, whereas the younger country endogenously dominates the world economy determining the world prices, in the free trade steady state. Second, although uncompensated free trade cannot be Pareto superior to autarky, there exists a compensation scheme applied within each country such that free trade is Pareto superior to autarky.
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Bibliographic InfoPaper provided by Research Institute for Economics & Business Administration, Kobe University in its series Discussion Paper Series with number 215.
Length: 21 pages
Date of creation: Jan 2008
Date of revision:
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Aging and trade; Gains from trade; Overlapping generations model; Transitional dynamics; Compensation scheme;
Other versions of this item:
- Naito, Takumi & Zhao, Laixun, 2009. "Aging, transitional dynamics, and gains from trade," Journal of Economic Dynamics and Control, Elsevier, vol. 33(8), pages 1531-1542, August.
- F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
- J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends, Macroeconomic Effects, and Forecasts
- O41 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
This paper has been announced in the following NEP Reports:
- NEP-AGE-2008-06-27 (Economics of Ageing)
- NEP-ALL-2008-06-27 (All new papers)
- NEP-DGE-2008-06-27 (Dynamic General Equilibrium)
- NEP-INT-2008-06-27 (International Trade)
- NEP-OPM-2008-06-27 (Open Economy Macroeconomics)
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