Wealth Accumulation and Growth in a Specific-Factors Model of Trade and Finance
AbstractThis paper investigates the allocative properties of an OLG specificfactors small open economy facing perfect capital mobility. Wealth formation, economic development and different labor market regimes are at the center-stage of the analysis. In a model with competitive wages and no unemployment, we find that exogenous shocks that do not affect human wealth —like the terms of trade and land endowment shifts— or the propensity to save, leave nonhuman wealth, consumption and aggregate labor unchanged; in such cases, capital formation is driven by the static effects exerted on sectoral labor. Disturbances that alter human wealth —like the world interest rate, and capital and labor taxation shocks— or the thrift rate, instead, affect nonhuman wealth and consumption as they involve an intergenerational redistribution of resources that modifies aggregate saving; labor hours supplied may be changed. In these circumstances, capital accumulation is the result of the consequences exerted on financial wealth and input demands. The consideration of a labor market with structural unemployment does not qualitatively affect the results, except for the world interest rate and the rate of time discount shifts. Our results differ substantially from those obtained in static and dynamic specific-factors setups with financial autharky.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by University of Molise, Dept. SEGeS in its series Economics & Statistics Discussion Papers with number esdp06029.
Length: 33 pages
Date of creation: 16 Jun 2006
Date of revision:
Specific-Factors; Capital Accumulation; Land; Net Foreign Assets; Finite Horizons.;
Find related papers by JEL classification:
- F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
- F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
- 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-ALL-2006-06-24 (All new papers)
- NEP-DEV-2006-06-24 (Development)
- NEP-DGE-2006-06-24 (Dynamic General Equilibrium)
- NEP-FMK-2006-06-24 (Financial Markets)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Feldstein, Martin S, 1977. "The Surprising Incidence of a Tax on Pure Rent: A New Answer to an Old Question," Journal of Political Economy, University of Chicago Press, vol. 85(2), pages 349-60, April.
- Petrucci, Alberto & Phelps, Edmund S, 2005. "Capital Subsidies versus Labor Subsidies: A Trade-Off between Capital and Employment?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 37(5), pages 907-22, October.
- Petrucci, Alberto, 2005.
"The Incidence of a Tax on Pure Rent in a Small Open Economy,"
Economics & Statistics Discussion Papers
esdp05025, University of Molise, Dept. SEGeS.
- Petrucci, Alberto, 2006. "The incidence of a tax on pure rent in a small open economy," Journal of Public Economics, Elsevier, vol. 90(4-5), pages 921-933, May.
- Jonathan Eaton, 1988.
NBER Working Papers
1512, National Bureau of Economic Research, Inc.
- Nielsen, Soren Bo & Sorensen, Peter Birch, 1991.
"Capital income taxation in a growing open economy,"
European Economic Review,
Elsevier, vol. 35(1), pages 179-197, January.
- Mahbub Morshed, A. K. M. & Turnovsky, Stephen J., 2004.
"Sectoral adjustment costs and real exchange rate dynamics in a two-sector dependent economy,"
Journal of International Economics,
Elsevier, vol. 63(1), pages 147-177, May.
- A.K.M. Mahbub Morshed & Stephen Turnovsky, 2003. "Sectoral Adjustment Costs and Real Exchange Rate Dynamics in a Two-Sector Dependent Economy," Working Papers UWEC-2002-17-P, University of Washington, Department of Economics, revised Jan 2003.
- Solow, Robert M., 1979. "Another possible source of wage stickiness," Journal of Macroeconomics, Elsevier, vol. 1(1), pages 79-82.
- Ryder, Harl E, Jr, 1969. "Optimal Accumulation in a Two-Sector Neoclassical Economy with Non-Shiftable Capital," Journal of Political Economy, University of Chicago Press, vol. 77(4), pages 665-83, Part II, .
- Olivier J. Blanchard, 1984.
"Debt, Deficits and Finite Horizons,"
NBER Working Papers
1389, National Bureau of Economic Research, Inc.
- Calvo, Guillermo, 1979. "Quasi-Walrasian Theories of Unemployment," American Economic Review, American Economic Association, vol. 69(2), pages 102-07, May.
- Shapiro, Carl & Stiglitz, Joseph E, 1984. "Equilibrium Unemployment as a Worker Discipline Device," American Economic Review, American Economic Association, vol. 74(3), pages 433-44, June.
- Jonathan Eaton, 1987.
"A Dynamic Specific-Factors Model of International Trade,"
NBER Working Papers
1479, National Bureau of Economic Research, Inc.
- Eaton, Jonathan, 1987. "A Dynamic Specific-Factors Model of International Trade," Review of Economic Studies, Wiley Blackwell, vol. 54(2), pages 325-38, April.
- Brock, Philip L & Turnovsky, Stephen J, 1993. "The Growth and Welfare Consequences of Differential Tariffs," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 34(4), pages 765-94, November.
- Roldos, Jorge E, 1991. "Tariffs, Investment and the Current Account," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 32(1), pages 175-94, February.
- Hiau Looi Kee & Hian Teck Hoon, 2004.
"Trade, Capital Accumulation and Structural Unemployment: An Empirical Study of the Singapore Economy,"
06-2004, Singapore Management University, School of Economics, revised Mar 2004.
- Kee, Hiau Looi & Hoon, Hian Teck, 2005. "Trade, capital accumulation and structural unemployment: an empirical study of the Singapore economy," Journal of Development Economics, Elsevier, vol. 77(1), pages 125-152, June.
- Hiau Looi Kee & Hian Teck Hoon, 2004. "Trade, capital accumulation, and structural unemployment : An empirical study of the Singapore economy," Policy Research Working Paper Series 3272, The World Bank.
- Mussa, Michael, 1974. "Tariffs and the Distribution of Income: The Importance of Factor Specificity, Substitutability, and Intensity in the Short and Long Run," Journal of Political Economy, University of Chicago Press, vol. 82(6), pages 1191-1203, Nov.-Dec..
- Salop, Steven C, 1979. "A Model of the Natural Rate of Unemployment," American Economic Review, American Economic Association, vol. 69(1), pages 117-25, March.
- repec:fth:coluec:521 is not listed on IDEAS
- Kose, M. Ayhan, 2002. "Explaining business cycles in small open economies: 'How much do world prices matter?'," Journal of International Economics, Elsevier, vol. 56(2), pages 299-327, March.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Claudio Lupi).
If references are entirely missing, you can add them using this form.