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Specialization in a dynamic trade model: An overlapping generations case

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  • Akihiko Kaneko

Abstract

We explore a small open economy with overlapping generations to show that demographic structure is an important factor for the determination of a production pattern in the dynamic trade theory. In the representative agent model, Baxter (1992) shows that even if there are two commodities and two production factors, there is a Ricardian implication that opening up to trade leads to perfect specialization in a small open economy. In contrast, using the overlapping generations model, we find that the heterogeneity of the economic agents generally makes imperfect specialization occur. We also find that whether the stability condition holds or not is crucial for the determination of the long-run production pattern.

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  • Akihiko Kaneko, 2006. "Specialization in a dynamic trade model: An overlapping generations case," International Economic Journal, Taylor & Francis Journals, vol. 20(3), pages 357-368.
    • Handle: RePEc:taf:intecj:v:20:y:2006:i:3:p:357-368
    DOI: 10.1080/10168730600879422
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    References listed on IDEAS

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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.
    2. Koichi Futagami & Akihiko Kaneko & Yoshiyasu Ono & Akihisa Shibata, 2008. "International Asset Trade, Capital Income Taxation, and Specialization Patterns," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 10(5), pages 743-763, October.
    3. Sen, Partha, 2015. "Uncertain lifetimes and convergence in a two-country Heckscher–Ohlin model," Mathematical Social Sciences, Elsevier, vol. 78(C), pages 14-20.

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