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A Factor Endowment Theory of Endogenous Growth and International Trade

Listed author(s):
  • Yunfang Hu

    (Department of Economics, Kobe University, Japan)

  • Murray C. Kemp

    (Australian Graduate School of Management, University of New South Wales, Australia)

  • Koji Shimomura

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

The Frankel-Romer-Lucas theory of endogenous growth rests on the assumption of knowledge-based externalities and price-taking representative households. It is argued that, in a context of long-run growth, these assumptions are mutually incompatible (that representative households will co-operate to internalize the externalities) and that therefore the relevance of the theory must be questioned. In the present paper we offer a model of endogenous growth, based on representative households but recognizing that, in a context of long-run growth, the households must cooperate. Our economy consists of many countries, populated by households which are identical within countries but not necessarily across countries. In each country, government expenditure on a public intermediate good plays a crucial role in the realization of persistent growth. It is shown that the long-run pattern of international trade is determined in a Heckscher-Ohlin manner.

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File Function: First version, 2004
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Paper provided by Research Institute for Economics & Business Administration, Kobe University in its series Discussion Paper Series with number 150.

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Length: 27 pages
Date of creation: Mar 2004
Handle: RePEc:kob:dpaper:150
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