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Factor Accumulation and Trade: Dynamic Comparative Advantage with Endogenous Physical and Human Capital

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Author Info

  • Eric W. Bond

    ()
    (Department of Economics, Vanderbilt University)

  • Kathleen Trask

    (Department of Economics, University of Kentucky)

  • Ping Wang

    ()
    (Department of Economics, Vanderbilt University)

Abstract

This paper develops a two country endogenous growth model with accumulation of both physical and human capital. We establish the existence of two country balanced growth equilibria in which physical and human capital grow at the same rate in each country but physical/human capital ratios differ across countries. These balanced growth equilibria satisfy a static and dynamic version of the Heckscher-Ohlin theorem. We also show the existence of unbalanced growth equilibria in which the static and dynamic Hechscher-Ohlin theorems can be violated. The multiplicity of paths with international trade results from the intertemporal no arbitrage condition in cases where trade results in an equalization of factor prices across countries.

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File URL: http://www.accessecon.com/pubs/VUECON/vu00-w31.pdf
File Function: Revised version, 2000
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Bibliographic Info

Paper provided by Vanderbilt University Department of Economics in its series Vanderbilt University Department of Economics Working Papers with number 0031.

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Date of creation: Oct 1996
Date of revision: Aug 2000
Handle: RePEc:van:wpaper:0031

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Web page: http://www.vanderbilt.edu/econ/wparchive/index.html

Related research

Keywords: Trade patterns; factor accumulation; endogenous growth;

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  1. Robert J. Barro, 1989. "Economic Growth in a Cross Section of Countries," NBER Working Papers 3120, National Bureau of Economic Research, Inc.
  2. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, Elsevier, vol. 22(1), pages 3-42, July.
  3. Nancy L. Stokey & Sergio Rebelo, 1993. "Growth Effects of Flat-Rate Taxes," NBER Working Papers 4426, National Bureau of Economic Research, Inc.
  4. Paul M. Romer, 1989. "Human Capital And Growth: Theory and Evidence," NBER Working Papers 3173, National Bureau of Economic Research, Inc.
  5. Stokey, Nancy L, 1991. "Human Capital, Product Quality, and Growth," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 106(2), pages 587-616, May.
  6. Jones, Larry E & Manuelli, Rodolfo E, 1990. "A Convex Model of Equilibrium Growth: Theory and Policy Implications," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 98(5), pages 1008-38, October.
  7. Sergio T. Rebelo, 1990. "Long Run Policy Analysis and Long Run Growth," NBER Working Papers 3325, National Bureau of Economic Research, Inc.
  8. Tallman, Ellis W. & Wang, Ping, 1994. "Human capital and endogenous growth evidence from Taiwan," Journal of Monetary Economics, Elsevier, Elsevier, vol. 34(1), pages 101-124, August.
  9. Bond, Eric W. & Wang, Ping & Yip, Chong K., 1996. "A General Two-Sector Model of Endogenous Growth with Human and Physical Capital: Balanced Growth and Transitional Dynamics," Journal of Economic Theory, Elsevier, Elsevier, vol. 68(1), pages 149-173, January.
  10. Caballe, Jordi & Santos, Manuel S, 1993. "On Endogenous Growth with Physical and Human Capital," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 101(6), pages 1042-67, December.
  11. Trefler, Daniel, 1993. "International Factor Price Differences: Leontief Was Right!," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 101(6), pages 961-87, December.
  12. Stokey, Nancy L, 1996. " Free Trade, Factor Returns, and Factor Accumulation," Journal of Economic Growth, Springer, Springer, vol. 1(4), pages 421-47, December.
  13. Stiglitz, Joseph E, 1970. "Factor Price Equalization in a Dynamic Economy," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 78(3), pages 456-88, May-June.
  14. Ronald Findlay, 1995. "Factor Proportions, Trade, and Growth," MIT Press Books, The MIT Press, The MIT Press, edition 1, volume 1, number 0262061759, December.
  15. Findlay, Ronald & Kierzkowski, Henryk, 1983. "International Trade and Human Capital: A Simple General Equilibrium Model," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 91(6), pages 957-78, December.
  16. Deardorff, Alan V & Hanson, James A, 1978. "Accumulation and a Long-Run Heckscher-Ohlin Theorem," Economic Inquiry, Western Economic Association International, Western Economic Association International, vol. 16(2), pages 288-92, April.
  17. Findlay, Ronald, 1970. "Factor Proportions and Comparative Advantage in the Long Run," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 78(1), pages 27-34, Jan.-Feb..
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