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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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  • Serdar Sayan

    (Bilkent University)

  • Ali Emre Uyar

    (UCLA)

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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Bibliographic Info

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
Date of revision:
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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Web page: http://128.118.178.162

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Keywords: Unequal population growth rates; labor migration; international trade; overlapping-generations;

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Citations

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Cited by:
  1. Serdar Sayan, 2002. "Dynamic Heckscher-Ohlin Results from a 2x2x2x2 Overlapping Generations Model with Unequal Population Growth Rates," Departmental Working Papers 0201, Bilkent University, Department of Economics.
  2. James Sprigg & Mark Ehlen, 2007. "Comparative dynamics in an overlapping-generations model: the effects of quasi-rational discrete choice on finding and maintaining Nash equilibrium," Computational Economics, Society for Computational Economics, vol. 29(1), pages 69-96, February.
  3. 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.

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