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Directions of Trade Flows and Labor Movements between High- And Low-Population Growth Countries: An Overlapping Generations General Equilibrium Analysis

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Author Info
Serdar Sayan (Bilkent University)
Ali Emre Uyar (UCLA)

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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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Paper provided by EconWPA in its series GE, Growth, Math methods with number 0203003.

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Length: 35 pages
Date of creation: 14 Mar 2002
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Handle: RePEc:wpa:wuwpge:0203003

Note: Type of Document - Acrobat PDF; prepared on IBM PC; to print on HP Laser Jet; pages: 35 ; figures: Included. Department of Economics Discussion Paper No. 01-08, Bilkent University, January 2002.
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Related research
Keywords: Unequal population growth rates labor migration international trade overlapping-generations

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Find related papers by JEL classification:
F22 - International Economics - - International Factor Movements and International Business - - - International Migration
F10 - International Economics - - Trade - - - General
J14 - Labor and Demographic Economics - - Demographic Economics - - - Economics of the Elderly; Economics of the Handicapped
J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
D50 - Microeconomics - - General Equilibrium and Disequilibrium - - - General

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References listed on IDEAS
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  15. Galor, Oded & Stark, Oded, 1990. "Migrants' Savings, the Probability of Return Migration and Migrants' Performance," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 31(2), pages 463-67, May. [Downloadable!] (restricted)
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  1. Serdar Sayan, 2002. "Dynamic Heckscher-Ohlin Results from a 2x2x2x2 Overlapping Generations Model with Unequal Population Growth Rates," GE, Growth, Math methods 0203002, EconWPA, revised 14 Mar 2002. [Downloadable!]
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