Time Patience and Specialization Patterns in the Presence of Asset Trade
Specialization patterns in an open-economy two-sector growth model with endogenous capital accumulation are examined in the presence of free international lending and borrowing. Without free international lending and borrowing it is known that, whereas the less (time-)patient country decumulates real capital, the more patient country accumulates real capital and eventually specializes in a capital-intensive industry. However, free trade of international financial assets causes a dramatic change in long-run specialization patterns. In this case the less patient country may well specialize in the capital-intensive industry and the more patient country in the labor-intensive industry. Copyright (c) 2010 The Ohio State University.
Volume (Year): 42 (2010)
Issue (Month): 1 (02)
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