Trade, growth, and convergence in a dynamic Heckscher-Ohlin model
In models in which convergence in income levels across closed countries is driven by faster accumulation of a productive factor in the poorer countries, opening these countries to trade can stop convergence and even cause divergence. We make this point using a dynamic Heckscher-Ohlin model — a combination of a static two-good, two-factor Heckscher-Ohlin trade model and a two-sector growth model — with infinitely lived consumers where international borrowing and lending are not permitted. We obtain two main results: First, countries that differ only in their initial endowments of capital per worker may converge or diverge in income levels over time, depending on the elasticity of substitution between traded goods. Divergence can occur for parameter values that would imply convergence in a world of closed economies and vice versa. Second, factor price equalization in a given period does not imply factor price equalization in future periods.
|Date of creation:||2008|
|Date of revision:|
|Contact details of provider:|| Postal: 90 Hennepin Avenue, P.O. Box 291, Minneapolis, MN 55480-0291|
Phone: (612) 204-5000
Web page: http://minneapolisfed.org/
More information through EDIRC
|Order Information:||Web: http://www.minneapolisfed.org/pubs/|
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.:
- Deardorff, Alan V & Hanson, James A, 1978. "Accumulation and a Long-Run Heckscher-Ohlin Theorem," Economic Inquiry, Western Economic Association International, vol. 16(2), pages 288-92, April.
- Claustre Bajona, 2010.
"Demographics in Dynamic Heckscher-Ohlin Models: Overlapping Generations versus Infinitely Lived Consumers,"
2010 Meeting Papers
1172, Society for Economic Dynamics.
- 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.
- 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.
- Yoshiyasu Ono & Akihisa Shibata, 2005. "Fiscal Spending, Relative-Price Dynamics, and Welfare in a World Economy," Review of International Economics, Wiley Blackwell, vol. 13(2), pages 216-236, 05.
- 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, 08.
- Eric W. Bond & Kathleen Trask & Ping Wang, 1996. "Factor Accumulation and Trade: Dynamic Comparative Advantage with Endogenous Physical and Human Capital," Vanderbilt University Department of Economics Working Papers 0031, Vanderbilt University Department of Economics, revised Aug 2000.
- Baxter, Marianne, 1992.
"Fiscal Policy, Specialization, and Trade in the Two-Sector Model: The Return of Ricardo?,"
Journal of Political Economy,
University of Chicago Press, vol. 100(4), pages 713-44, August.
- Marianne Baxter, 1991. "Fiscal policy, specialization, and trade in the two-sector model: the return of Ricardo?," Discussion Paper / Institute for Empirical Macroeconomics 56, Federal Reserve Bank of Minneapolis.
- Partha Chatterjee & Malik Shukayev, 2006. "Convergence in a Stochastic Dynamic Heckscher-Ohlin Model," Staff Working Papers 06-23, Bank of Canada.
- 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.
- Brecher, Richard A & Chen, Zhiqi & Choudhri, Ehsan U, 2002. "Absolute and Comparative Advantage, Reconsidered: The Pattern of International Trade with Optimal Saving," Review of International Economics, Wiley Blackwell, vol. 10(4), pages 645-56, November.
- Koji Shimomura & Kazuo Nishimura, 2001.
"Trade and Indeterminacy in a Dynamic General Equilibrium Model,"
Discussion Paper Series
117, Research Institute for Economics & Business Administration, Kobe University.
- Nishimura, Kazuo & Shimomura, Koji, 2002. "Trade and Indeterminacy in a Dynamic General Equilibrium Model," Journal of Economic Theory, Elsevier, vol. 105(1), pages 244-260, July.
- Rebelo, Sergio, 1991.
"Long-Run Policy Analysis and Long-Run Growth,"
Journal of Political Economy,
University of Chicago Press, vol. 99(3), pages 500-521, June.
- Findlay, Ronald, 1970. "Factor Proportions and Comparative Advantage in the Long Run," Journal of Political Economy, University of Chicago Press, vol. 78(1), pages 27-34, Jan.-Feb..
- Stiglitz, Joseph E, 1970. "Factor Price Equalization in a Dynamic Economy," Journal of Political Economy, University of Chicago Press, vol. 78(3), pages 456-88, May-June.
- Francesc Obiols-Homs, 2002. "Trade Effects on the Personal Distribution of Wealth," Working Papers 0208, Centro de Investigacion Economica, ITAM.
- Mussa, Michael, 1978. "Dynamic Adjustment in the Heckscher-Ohlin-Samuelson Model," Journal of Political Economy, University of Chicago Press, vol. 86(5), pages 775-91, October.
- Smith, Alasdair, 1984. "Capital theory and trade theory," Handbook of International Economics, in: R. W. Jones & P. B. Kenen (ed.), Handbook of International Economics, edition 1, volume 1, chapter 6, pages 289-324 Elsevier.
- 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.
- Kazuo Nishimura & Koji Shimomura, 2006. "Indeterminacy in a dynamic two-country model," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 29(2), pages 307-324, October.
- 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.
- Alejandro Cunat & Marco Maffezzoli, 2004.
"Neoclassical Growth and Commodity Trade,"
Review of Economic Dynamics,
Elsevier for the Society for Economic Dynamics, vol. 7(3), pages 707-736, July.
- H. Oniki & H. Uzawa, 1965. "Patterns of Trade and Investment in a Dynamic Model of International Trade," Review of Economic Studies, Oxford University Press, vol. 32(1), pages 15-37.
When requesting a correction, please mention this item's handle: RePEc:fip:fedmsr:378. 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: (Jannelle Ruswick)
If references are entirely missing, you can add them using this form.