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A Two-Country Dynamic General Equilibrium Model of Endogenous Growth and International Trade

Author

Listed:
  • Junko Doi

    (Graduate School of Economics, Kobe University, Japan)

  • Koji Shimomura

    (Research Institute for Economics & Business Administration (RIEB), Kobe University, Japan)

Abstract

We formulate a two(-country) by two(-tradable good) by two(-factor) dynamic general equilibrium model of endogenous growth and international rade that has no market distortion. After deriving the conditions for a balanced growth path with incomplete specialization in both countries to exist and to be locally saddlepoint stable, we show that along the balanced growth paths (i) a dynamic version of the Heckscher-Ohlin Theorem is established, (ii) the relationship between the volume of international trade and the long-run growth rate depends on the factor-intensity ranking between the two sector, and (iii) so does whether the Law of Comparative Advantage holds or not. The Stolper-Samuelson Theorem and the Factor Price Equalization Theorem are shown to hold in a dynamic framework.

Suggested Citation

  • Junko Doi & Koji Shimomura, 2001. "A Two-Country Dynamic General Equilibrium Model of Endogenous Growth and International Trade," Discussion Paper Series 123, Research Institute for Economics & Business Administration, Kobe University.
    • Handle: RePEc:kob:dpaper:123
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    More about this item

    Keywords

    International trade; Market; Growth rate;
    All these keywords.

    JEL classification:

    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • F10 - International Economics - - Trade - - - General

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