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Dynamic Heckscher-Ohlin Results from a 2x2x2x2 Overlapping Generations Model with Unequal Population Growth Rates

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  • Serdar Sayan

    (Bilkent University)

Abstract

This paper considers a two-country world where the population in one country grows faster than the other, and investigates the implications of the addition of non-stationary population dynamics to a simple 2- commodity, 2-factor model of international trade within an overlapping- generations framework. The two countries in the world considered are assumed to be identical in every respect except, for their population growth rates initially. The effects of differential speed of population growth on relative factor endowments and patterns of international trade are explored by comparing simulation results obtained from the overlapping-generations general equilibrium model under autarky and trade scenarios. Unequal population growth rates are shown to give rise to differentials in wage rates and rentals for capital under autarky conditions. This, in turn, causes costs of production and relative prices to differ, creating the grounds for trade in the sense of Heckscher-Ohlin (HO). Yet, the results from simulation exercises indicate that static welfare results from the standard 2x2x2 HO model can not be generalized to hold in a dynamic setting with overlapping generations of individuals.

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File URL: http://128.118.178.162/eps/ge/papers/0203/0203002.pdf
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Bibliographic Info

Paper provided by EconWPA in its series GE, Growth, Math methods with number 0203002.

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Length: 37 pages
Date of creation: 14 Mar 2002
Date of revision: 14 Mar 2002
Handle: RePEc:wpa:wuwpge:0203002

Note: Type of Document - Acrobat PDF; prepared on IBM PC; to print on HP Laser Jet; pages: 37 ; figures: Included. Department of Economics Discussion Paper No. 02-01, Bilkent University, January 2002.
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Web page: http://128.118.178.162

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Keywords: Unequal population growth rates; Heckscher-Ohlin model; international trade; overlapping-generations;

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References

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  1. Eaton, Jonathan, 1987. "A Dynamic Specific-Factors Model of International Trade," Review of Economic Studies, Wiley Blackwell, vol. 54(2), pages 325-38, April.
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  5. Serdar Sayan & Ali Emre Uyar, 2002. "Directions of Trade Flows and Labor Movements between High- And Low-Population Growth Countries: An Overlapping Generations General Equilibrium Analysis," GE, Growth, Math methods 0203003, EconWPA.
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  11. Kenc, Turalay & Sayan, Serdar, 2001. "Demographic shock transmission from large to small countries: An overlapping generations CGE analysis," Journal of Policy Modeling, Elsevier, vol. 23(6), pages 677-702, August.
  12. Willem H. Buiter, 1979. "Time Preference and International Lending and Borrowing in an Overlapping-Generations Model," NBER Working Papers 0352, National Bureau of Economic Research, Inc.
  13. Galor, Oded, 1986. "Time preference and international labor migration," Journal of Economic Theory, Elsevier, vol. 38(1), pages 1-20, February.
  14. Serdar Sayan, 2001. "Patterns of Trade between Countries with Differing Age Compositions of Populations: An Overlapping Generations General Equilibrium Analysis," Computing in Economics and Finance 2001 252, Society for Computational Economics.
  15. Ayse Imrohoroglu & Selahattin Imrohoroglu & Douglas H. Joines, 1998. "Computing Models of Social Security," QM&RBC Codes 131, Quantitative Macroeconomics & Real Business Cycles.
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Citations

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Cited by:
  1. Mehdi Jelassi & Serdar Sayan, 2003. "Implications of Unequal Rates of Population Growth for Trade," Departmental Working Papers 0302, Bilkent University, Department of Economics.
  2. Sayan, Serdar, 2005. "Heckscher-Ohlin revisited: implications of differential population dynamics for trade within an overlapping generations framework," Journal of Economic Dynamics and Control, Elsevier, vol. 29(9), pages 1471-1493, September.
  3. Fedotenkov, I., 2012. "Pensions and ageing in a globalizing world. International spillover effects via trade and factor mobility," Open Access publications from Tilburg University urn:nbn:nl:ui:12-5590843, Tilburg University.

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