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Uncertain lifetimes and convergence in a two-country Heckscher–Ohlin model

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  • Sen, Partha

Abstract

In a two-country infinite-horizon model, with two traded goods and two factors of production and no international borrowing and lending, there is no convergence of incomes if there is factor-price equalization. With factor-price equalization, the Euler equations of the two economies become identical. I show that in such a set-up if agents have a non-zero probability of death, then we do get convergence. In the steady state the two economies have identical capital–labor ratios and revert to autarky.

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  • Sen, Partha, 2015. "Uncertain lifetimes and convergence in a two-country Heckscher–Ohlin model," Mathematical Social Sciences, Elsevier, vol. 78(C), pages 14-20.
  • Handle: RePEc:eee:matsoc:v:78:y:2015:i:c:p:14-20
    DOI: 10.1016/j.mathsocsci.2015.08.002
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    Cited by:

    1. Partha Sen & Koji Shimomura, 2017. "Convergence and Overtaking in a Dynamic two Country Model," Open Economies Review, Springer, vol. 28(1), pages 107-124, February.

    More about this item

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies

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