Development Paths and Dynamic Comparative Advantages: When Leamer Met Solow
An important condition for convergence is that countries share the same technology for the aggregate production function (Solow, 1956). If countries produce a different mix of products, however, they will have a different aggregate production function. We argue that the inclusion of a fixed factor, such as natural resources, strongly determines the pattern of production and trade, and thus the path of development (Leamer, 1987) and the level of per capita consumption of a small open economy. We build a dynamic model of comparative advantages that naturally leads to different steady-state equilibria. Our main findings are, first, that differences in income and capital per worker between countries with and without natural resources (and with different types of natural resources) are explained by the relative rent of the natural resource factor and the capital-labor ratio used in the natural resource sector relative to the other sectors. An economy that discovers a natural resource will almost alwaysenjoy a higher level of consumption in steady state, although we describe one specific case in which it is not optimal to exploit the natural resource. Second, for economies without natural resources, becoming industrialized is always good (in terms of consumption). Nevertheless, countries with natural resources could end up with a less industrialized productive sector, but a higher level of consumption.
|Date of creation:||Dec 2007|
|Contact details of provider:|| Postal: Casilla No967, Santiago|
Phone: (562) 670 2000
Fax: (562) 698 4847
Web page: http://www.bcentral.cl/
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Claustre Bajona & Timothy Kehoe, 2010.
"Trade, Growth, and Convergence in a Dynamic Heckscher-Ohlin Model,"
Review of Economic Dynamics,
Elsevier for the Society for Economic Dynamics, vol. 13(3), pages 487-513, July.
- Claustre Bajona & Timothy J. Kehoe, 2008. "Trade, growth, and convergence in a dynamic Heckscher-Ohlin model," Staff Report 378, Federal Reserve Bank of Minneapolis.
- Claustre Bajona & Timothy J. Kehoe, 2006. "Trade, Growth, and Convergence in a Dynamic Heckscher-Ohlin Model," NBER Working Papers 12567, National Bureau of Economic Research, Inc.
- Claustre Bajona & Timothy Kehoe, 2010. "Code files for "Trade, Growth, and Convergence in a Dynamic Heckscher-Ohlin Model"," Computer Codes 09-241, Review of Economic Dynamics.
- 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.
- Sebastián Claro, 2005. "Financial Integration, Technology Differences and Capital Flows," Documentos de Trabajo 306, Instituto de Economia. Pontificia Universidad Católica de Chile..
When requesting a correction, please mention this item's handle: RePEc:chb:bcchwp:453. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Claudio Sepulveda)
If references are entirely missing, you can add them using this form.