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

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  • 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.

Suggested Citation

  • Eric W. Bond & Kathleen Trask & Ping Wang, 2003. "Factor Accumulation and Trade: Dynamic Comparative Advantage with Endogenous Physical and Human Capital," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 44(3), pages 1041-1060, August.
    • Handle: RePEc:ier:iecrev:v:44:y:2003:i:3:p:1041-1060
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    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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