IDEAS home Printed from https://ideas.repec.org/p/cpr/ceprdp/3322.html
   My bibliography  Save this paper

Neoclassical Growth and Commodity Trade

Author

Listed:
  • Cuñat, Alejandro
  • Maffezzoli, Marco

Abstract

We construct and numerically solve a dynamic Heckscher-Ohlin model in which the initial distribution of production factors in the world makes worldwide factor price equalization impossible, and leads countries to group in two diversification cones. We study the dynamics of income per capita and factor prices. Our results suggest that the Ramsey model under complete specialization overcomes several shortcomings of its autarky and factor price equalization counterparts. In comparison with the autarky model, for example, it can produce similar transitional dynamics and account for important cross-sectional differences in the levels and growth rates of income per capita while generating much smaller rental-rate differentials across countries. Moreover, it does not necessarily yield convergence in levels for identically parameterized economies. All in all, the Ramsey/Complete Specialization model seems to provide a better benchmark from which to depart when studying the dynamic behaviour of countries and cross-sectional differences in income per capita levels and growth rates.

Suggested Citation

  • Cuñat, Alejandro & Maffezzoli, Marco, 2002. "Neoclassical Growth and Commodity Trade," CEPR Discussion Papers 3322, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:3322
    as

    Download full text from publisher

    File URL: http://www.cepr.org/active/publications/discussion_papers/dp.php?dpno=3322
    Download Restriction: CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Eric W. Bond & Kathleen Trask & Ping Wang, 2003. "Factor Accumulation and Trade: Dynamic Comparative Advantage with Endogenous Physical and Human Capital," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 44(3), pages 1041-1060, August.
    2. King, Robert G & Rebelo, Sergio T, 1993. "Transitional Dynamics and Economic Growth in the Neoclassical Model," American Economic Review, American Economic Association, vol. 83(4), pages 908-931, September.
    3. Robert J. Barro, 1991. "Economic Growth in a Cross Section of Countries," The Quarterly Journal of Economics, Oxford University Press, vol. 106(2), pages 407-443.
    4. Debaere, Peter & Demiroglu, Ufuk, 2003. "On the similarity of country endowments," Journal of International Economics, Elsevier, vol. 59(1), pages 101-136, January.
    5. Deardorff, Alan V, 2001. "Rich and Poor Countries in Neoclassical Trade and Growth," Economic Journal, Royal Economic Society, vol. 111(470), pages 277-294, April.
    6. Quah, Danny T, 1996. "Twin Peaks: Growth and Convergence in Models of Distribution Dynamics," Economic Journal, Royal Economic Society, vol. 106(437), pages 1045-1055, July.
    7. Aart Kraay & Norman Loayza & Luis Servén & Jaume Ventura, 2005. "Country Portfolios," Journal of the European Economic Association, MIT Press, vol. 3(4), pages 914-945, June.
    8. James Harrigan, 2001. "Specialization and the Volume of Trade: Do the Data Obey the Laws?," NBER Working Papers 8675, National Bureau of Economic Research, Inc.
    9. Rudiger Dornbusch & Stanley Fischer & Paul A. Samuelson, 1980. "Heckscher-Ohlin Trade Theory with a Continuum of Goods," The Quarterly Journal of Economics, Oxford University Press, vol. 95(2), pages 203-224.
    10. Lucas, Robert E, Jr, 1990. "Why Doesn't Capital Flow from Rich to Poor Countries?," American Economic Review, American Economic Association, vol. 80(2), pages 92-96, May.
    11. Donald R. Davis & David E. Weinstein, 2001. "An Account of Global Factor Trade," American Economic Review, American Economic Association, vol. 91(5), pages 1423-1453, December.
    12. Deardorff, Alan V., 1994. "The possibility of factor price equalization, revisited," Journal of International Economics, Elsevier, vol. 36(1-2), pages 167-175, February.
    13. 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.
    14. Repetto, A. & Ventura, J., 1997. "The Leontief-Trefler Hypothesis and Factor Price Insensitivity," Working papers 97-13, Massachusetts Institute of Technology (MIT), Department of Economics.
    15. N. Gregory Mankiw & David Romer & David N. Weil, 1992. "A Contribution to the Empirics of Economic Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 107(2), pages 407-437.
    16. Caselli, Francesco & Esquivel, Gerardo & Lefort, Fernando, 1996. "Reopening the Convergence Debate: A New Look at Cross-Country Growth Empirics," Journal of Economic Growth, Springer, vol. 1(3), pages 363-389, September.
    17. Fabio Canova & Albert Marcet, 1995. "The poor stay poor: Non-convergence across countries and regions," Economics Working Papers 137, Department of Economics and Business, Universitat Pompeu Fabra, revised Jun 1999.
    18. Daron Acemoglu & Jaume Ventura, 2002. "The World Income Distribution," The Quarterly Journal of Economics, Oxford University Press, vol. 117(2), pages 659-694.
    19. Andrew Atkeson & Patrick J. Kehoe, 2000. "Paths of development for early- and late-bloomers in a dynamic Heckscher-Ohlin model," Staff Report 256, Federal Reserve Bank of Minneapolis.
    20. Donald R. Davis & David E. Weinstein, 2001. "The Factor Content of Trade," NBER Working Papers 8637, National Bureau of Economic Research, Inc.
    21. Jaume Ventura, 1997. "Growth and Interdependence," The Quarterly Journal of Economics, Oxford University Press, vol. 112(1), pages 57-84.
    22. Judd, Kenneth L., 1992. "Projection methods for solving aggregate growth models," Journal of Economic Theory, Elsevier, vol. 58(2), pages 410-452, December.
    23. Jose-Victor Rios-Rull & Per Krusell, 1999. "On the Size of U.S. Government: Political Economy in the Neoclassical Growth Model," American Economic Review, American Economic Association, vol. 89(5), pages 1156-1181, December.
    24. Danny Quah, 1996. "Twin Peaks: Growth and Convergence in Models of Distribution Dynamics," CEP Discussion Papers dp0280, Centre for Economic Performance, LSE.
    25. Stiglitz, Joseph E, 1970. "Factor Price Equalization in a Dynamic Economy," Journal of Political Economy, University of Chicago Press, vol. 78(3), pages 456-488, May-June.
    26. Michele Boldrin & Fabio Canova, 2001. "Inequality and convergence in Europe's regions: reconsidering European regional policies," Economic Policy, CEPR;CES;MSH, vol. 16(32), pages 205-253, April.
    27. repec:fth:michin:402 is not listed on IDEAS
    28. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Claustre Bajona & Timothy J. Kehoe, 2006. "Demographics in dynamic Heckscher-Ohlin models: overlapping generations versus infinitely lived consumers," Staff Report 377, Federal Reserve Bank of Minneapolis.
    2. 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.
    3. Michelle Connolly & Kei-Mu Yi, 2015. "How Much of South Korea's Growth Miracle Can Be Explained by Trade Policy?," American Economic Journal: Macroeconomics, American Economic Association, vol. 7(4), pages 188-221, October.
    4. Basco, Sergi & Mestieri, Marti, 2014. "The World Income Distribution: The Effects of International Unbundling of Production," TSE Working Papers 14-531, Toulouse School of Economics (TSE), revised Nov 2014.
    5. Lutz Arnold, 2007. "A generalized multi-country endogenous growth model," International Economics and Economic Policy, Springer, vol. 4(1), pages 61-100, April.
    6. Chatterjee, Partha & Shukayev, Malik, 2012. "A stochastic dynamic model of trade and growth: Convergence and diversification," Journal of Economic Dynamics and Control, Elsevier, vol. 36(3), pages 416-432.
    7. Honma, Satoshi & Yoshida, Yushi, 2017. "Convergence in pollution terms of trade," MPRA Paper 78810, University Library of Munich, Germany.
    8. Partha Sen, 2013. "Capital Accumulation and Convergence in a Small Open Economy," Review of International Economics, Wiley Blackwell, vol. 21(4), pages 690-704, September.
    9. Batista, Catia & Potin, Jacques, 2008. "International Specialization and the Return to Capital, 1976-2000," ESSEC Working Papers DR 08001, ESSEC Research Center, ESSEC Business School.
    10. Alejandro Cuñat & Marco Maffezzoli, 2007. "Can Comparative Advantage Explain the Growth of us Trade?," Economic Journal, Royal Economic Society, vol. 117(520), pages 583-602, April.
    11. Lars Calmfors & Giancarlo Corsetti & Seppo Honkapohja & John Kay & Gilles Saint-Paul & Hans-Werner Sinn & Jan-Egbert Sturm & Xavier Vives, 2006. "Chapter 2: Global Imbalances," EEAG Report on the European Economy, CESifo Group Munich, vol. 0, pages 50-67, March.
    12. Leimbach, Marian & Edenhofer, Ottmar, 2007. "Technological spillovers within multi-region models: Intertemporal optimization beyond the Negishi approach," Economic Modelling, Elsevier, vol. 24(2), pages 272-294, March.
    13. Catia Batista & Jacques Potin, 2007. "Heckscher-Ohlin Specialization and the Marginal Product of Capital, 1976-2000," Economics Series Working Papers 357, University of Oxford, Department of Economics.
    14. Sen, Partha, 2015. "Uncertain lifetimes and convergence in a two-country Heckscher–Ohlin model," Mathematical Social Sciences, Elsevier, vol. 78(C), pages 14-20.
    15. Alejandro Cuñat & Marco Maffezzoli, "undated". "Trade Integration and Growth," Working Papers 220, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
    16. Auer, Raphael A., 2015. "Human capital and the dynamic effects of trade," Journal of Development Economics, Elsevier, vol. 117(C), pages 107-118.
    17. Ventura, Jaume, 2005. "A Global View of Economic Growth," Handbook of Economic Growth,in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 22, pages 1419-1497 Elsevier.
    18. Petros Milionis, 2012. "Long-Run Development in the Open Economy," DEGIT Conference Papers c017_059, DEGIT, Dynamics, Economic Growth, and International Trade.
    19. Satoshi Honma & Yushi Yoshida, 2018. "Convergence in pollution terms of trade," Discussion Papers CRR Discussion Paper Series A: General 48, Shiga University, Faculty of Economics,Center for Risk Research.

    More about this item

    Keywords

    convergence; economic growth; heckscher-Ohlin; international trade; simulation;

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F40 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - General
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cpr:ceprdp:3322. 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: (). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.