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A Dynamic Heckscher-Ohlin Model and Inferior Goods

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  • Eric W. Bond
  • Kazumichi Iwasa
  • Kazuo Nishimura

Abstract

Under the assumption that a pure consumption good is labor intensive, we examined the properties of a two-country dynamic Heckscher-Ohlin model that allows for preferences to be non-homothetic (Bond et al. (2009)). In this paper, we assume that a pure consumption good is capital intensive and study the properties of the model. If both goods are normal, each country will have a unique autarkic steady state, and all steady state equilibria are saddle points. We also consider the case in which one good is inferior, and show that this can lead to multiple autarkic steady states and the possibility of inderminacy under free trade as in Bond et al. (2009).

Suggested Citation

  • Eric W. Bond & Kazumichi Iwasa & Kazuo Nishimura, 2011. "A Dynamic Heckscher-Ohlin Model and Inferior Goods," Asia-Pacific Journal of Accounting & Economics, Taylor & Francis Journals, vol. 18(3), pages 217-236.
    • Handle: RePEc:taf:raaexx:v:18:y:2011:i:3:p:217-236
    DOI: 10.1080/16081625.2011.9720882
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    References listed on IDEAS

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    1. Zhiqi Chen, 1992. "Long-Run Equilibria in a Dynamic Heckscher-Ohlin Model," Canadian Journal of Economics, Canadian Economics Association, vol. 25(4), pages 923-943, November.
    2. Jaume Ventura, 1997. "Growth and Interdependence," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 112(1), pages 57-84.
    3. Eric Bond & Kazumichi Iwasa & Kazuo Nishimura, 2011. "A dynamic two country Heckscher–Ohlin model with non-homothetic preferences," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 48(1), pages 171-204, September.
    4. Robert T. Jensen & Nolan H. Miller, 2008. "Giffen Behavior and Subsistence Consumption," American Economic Review, American Economic Association, vol. 98(4), pages 1553-1577, September.
    5. Ronald W. Jones, 2018. "The Structure of Simple General Equilibrium Models," World Scientific Book Chapters, in: International Trade Theory and Competitive Models Features, Values, and Criticisms, chapter 4, pages 61-84, World Scientific Publishing Co. Pte. Ltd..
    6. Bond, Eric W. & Iwasa, Kazumichi & Nishimura, Kazuo, 2013. "Poverty Traps And Inferior Goods In A Dynamic Heckscher–Ohlin Model," Macroeconomic Dynamics, Cambridge University Press, vol. 17(6), pages 1227-1251, September.
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    1. Eric W. Bond & Kazumichi Iwasa & Kazuo Nishimura, 2012. "The dynamic Heckscher–Ohlin model: A diagrammatic analysis," International Journal of Economic Theory, The International Society for Economic Theory, vol. 8(2), pages 197-211, June.

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