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Capital Accumulation And Convergence In A Small Open Economy


    (Faculty of Economics,South Asian University and Department of Economics, Delhi School of Economics, Delhi, India)

Outward-oriented economies seem to grow faster than inward-looking ones. Does the literature on convergence have anything to say on this? In the dynamic Heckscher-Ohlin-Samuelson model, with factor-price equalization, there is no convergence of incomes. This is because with identical preferences and return to capital, irrespective of initial levels the growth rates of consumption are the same. In the Specific Factors model, there is factor price equalization in the long run, but incomes depend on endowments of non-accumulable factors. Different specifications for the intersectorally mobile factors have different implications for development (as well as convergence).

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Paper provided by Centre for Development Economics, Delhi School of Economics in its series Working papers with number 212.

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Length: 24 pages
Date of creation: Feb 2012
Date of revision:
Handle: RePEc:cde:cdewps:212
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  1. Partha Chatterjee & Malik Shukayev, 2006. "Convergence in a Stochastic Dynamic Heckscher-Ohlin Model," Working Papers 06-23, Bank of Canada.
  2. Maurice Obstfeld & Kenneth S. Rogoff, 1996. "Foundations of International Macroeconomics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262150476, June.
  3. Richard A. Brecher & Zhiqi Chen & Ehsan U. Choudhri, 2000. "Absolute and Comparative Advantage, Reconsidered: The Pattern of International Trade with Optimal Saving," Carleton Economic Papers 00-02, Carleton University, Department of Economics, revised Nov 2002.
  4. Zhiqi Chen, 1992. "Long-Run Equilibria in a Dynamic Heckscher-Ohlin Model," Canadian Journal of Economics, Canadian Economics Association, vol. 25(4), pages 923-43, November.
  5. Claustre Bajona & Timothy J. Kehoe, 2006. "Demographics in Dynamic Heckscher-Ohlin Models: Overlapping Generations Versus Infinitely Lived Consumers," NBER Working Papers 12566, National Bureau of Economic Research, Inc.
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