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Trade and the Speed of Convergence

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  • E. Young Song

Abstract

Numerous studies on income convergence estimate the convergence equation derived for autarkic economies using data from the world that is increasingly integrated. This paper derives a convergence equation for a world integrated by trade from the standard Heckscher–Ohlin model with factor price equalization. The convergence equation for an integrated world differs from the autarkic one in that (1) the growth rate of each economy is increasing in the global growth rate; (2) the rate of convergence is increasing in the global growth rate; and (3) the rate of convergence, under conventional parameter values, is much lower.

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  • E. Young Song, 2014. "Trade and the Speed of Convergence," Review of Development Economics, Wiley Blackwell, vol. 18(1), pages 1-12, February.
    • Handle: RePEc:bla:rdevec:v:18:y:2014:i:1:p:1-12
    DOI: 10.1111/rode.12065
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    More about this item

    JEL classification:

    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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