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Trade and the Speed of Convergence

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  • E. Young Song

    ()
    (Department of Economics, Sogang University)

Abstract

This paper derives a convergence equation for a world integrated by trade. We find that factor price equalization reduces the rate of income convergence among economies with identical preferences and identical technologies. This finding hold true both in neoclassical growth models and in endogenous growth models with human capital accumulation. The integrated world model can explain low rates of convergence frequently observed in empirical studies without resorting to a large income share of capital, constraints on international borrowing, or adjustment costs in investment.

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File URL: ftp://163.239.165.41/RePEc/sgo/wpaper/SEY_RIME_2010-06.pdf
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Bibliographic Info

Paper provided by Research Institute for Market Economy, Sogang University in its series Working Papers with number 1006.

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Length: 48 pages
Date of creation: Mar 2010
Date of revision:
Handle: RePEc:sgo:wpaper:1006

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Related research

Keywords: convergence; factor price equalization; growth; integration; trade;

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  1. Caselli, Francesco & Esquivel, Gerardo & Lefort, Fernando, 1996. " Reopening the Convergence Debate: A New Look at Cross-Country Growth Empirics," Journal of Economic Growth, Springer, vol. 1(3), pages 363-89, September.
  2. Charles I. Jones, . "Sources of U.S. Economic Growth in a World of Ideas," Working Papers 98009, Stanford University, Department of Economics.
  3. William Hauk & Romain Wacziarg, 2009. "A Monte Carlo study of growth regressions," Journal of Economic Growth, Springer, vol. 14(2), pages 103-147, June.
  4. Islam, Nazrul, 1995. "Growth Empirics: A Panel Data Approach," The Quarterly Journal of Economics, MIT Press, vol. 110(4), pages 1127-70, November.
  5. Durlauf, Steven N. & Johnson, Paul A. & Temple, Jonathan R.W., 2005. "Growth Econometrics," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 8, pages 555-677 Elsevier.
  6. Ronald Findlay, 1995. "Factor Proportions, Trade, and Growth," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262061759, January.
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