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Rich And Poor Countries In Neoclassical Trade And Growth

In: Comparative Advantage, Growth, And The Gains From Trade And Globalization A Festschrift in Honor of Alan V Deardorff

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  • Alan V. Deardorff

Abstract

A neoclassical growth model provides an explanation for a ‘poverty trap’, ‘club convergence’, or ‘twin peaks’, in terms of specialisation and international trade. The model has many countries with identical linearly homogeneous technologies for producing three goods using capital and labour. With diverse initial endowments, initial equilibrium has unequal factor prices and two diversification cones. With savings out of wages, following Galor (1996), there may easily be multiple steady states. Poor countries converge to a low steady state while rich countries converge to a high one, even though all share identical technological and behavioural parameters.

Suggested Citation

  • Alan V. Deardorff, 2011. "Rich And Poor Countries In Neoclassical Trade And Growth," World Scientific Book Chapters, in: Robert M Stern (ed.), Comparative Advantage, Growth, And The Gains From Trade And Globalization A Festschrift in Honor of Alan V Deardorff, chapter 25, pages 295-313, World Scientific Publishing Co. Pte. Ltd..
    • Handle: RePEc:wsi:wschap:9789814340373_0025
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    JEL classification:

    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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