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Factor Accumulation and Trade: Dynamic Comparative Advantage with Endogenous Physical and Human Capital

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Listed author(s):
  • Eric W. Bond
  • Kathleen Trask
  • Ping Wang

Abstract

This article develops a two-country endogenous growth model with accumulation of both physical and human capital. We establish the existence of two-country balanced growth equilibria with physical and human capital in which a static and dynamic version of the Heckscher-Ohlin (HO) hypothesis hold true. We also show the existence of unbalanced growth equilibria in which the static and dynamic HO hypotheses can be violated. The multiplicity of paths with international trade emerge as a result of the intertemporal no-arbitrage condition when factor prices are equalized across countries. Copyright 2003 By The Economics Department Of The University Of Pennsylvania And Osaka University Institute Of Social And Economic Research Association.

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Article provided by Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association in its journal International Economic Review.

Volume (Year): 44 (2003)
Issue (Month): 3 (08)
Pages: 1041-1060

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Handle: RePEc:ier:iecrev:v:44:y:2003:i:3:p:1041-1060
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Find related papers by JEL classification:
  • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General
  • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
  • 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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  1. Stokey, Nancy L & Rebelo, Sergio, 1995. "Growth Effects of Flat-Rate Taxes," Journal of Political Economy, University of Chicago Press, vol. 103(3), pages 519-550, June.
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  16. Caballe, Jordi & Santos, Manuel S, 1993. "On Endogenous Growth with Physical and Human Capital," Journal of Political Economy, University of Chicago Press, vol. 101(6), pages 1042-1067, December.
  17. Stiglitz, Joseph E, 1970. "Factor Price Equalization in a Dynamic Economy," Journal of Political Economy, University of Chicago Press, vol. 78(3), pages 456-488, May-June.
  18. Xavier Sala-I-Martin, 1997. "Transfers, Social Safety Nets, and Economic Growth," IMF Staff Papers, Palgrave Macmillan, vol. 44(1), pages 81-102, March.
  19. Stokey, Nancy L, 1996. "Free Trade, Factor Returns, and Factor Accumulation," Journal of Economic Growth, Springer, vol. 1(4), pages 421-447, December.
  20. Ni, Shawn & Wang, Xinghe, 1994. "Human capital and income taxation in an endogenous growth model," Journal of Macroeconomics, Elsevier, vol. 16(3), pages 493-507.
  21. Alwyn Young, 1995. "The Tyranny of Numbers: Confronting the Statistical Realities of the East Asian Growth Experience," The Quarterly Journal of Economics, Oxford University Press, vol. 110(3), pages 641-680.
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