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A Factor Endowment Theory of Endogenous Growth and International Trade


  • 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.

Suggested Citation

  • Yunfang Hu & Murray C. Kemp & Koji Shimomura, 2004. "A Factor Endowment Theory of Endogenous Growth and International Trade," Discussion Paper Series 150, Research Institute for Economics & Business Administration, Kobe University.
  • Handle: RePEc:kob:dpaper:150

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    References listed on IDEAS

    1. Ryoji Ohdoi, 2007. "Productive Government Spending, Patterns Of Specialization And Economic Growth In A Small Open Economy," The Japanese Economic Review, Japanese Economic Association, vol. 58(1), pages 127-146, March.
    2. Howitt, Peter & Mayer-Foulkes, David, 2005. "R&D, Implementation, and Stagnation: A Schumpeterian Theory of Convergence Clubs," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 37(1), pages 147-177, February.
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    Cited by:

    1. Hu, Yunfang & Ohdoi, Ryoji & Shimomura, Koji, 2008. "Indeterminacy in a two-sector endogenous growth model with productive government spending," Journal of Macroeconomics, Elsevier, vol. 30(3), pages 1104-1123, September.
    2. Ida D'Attoma & Silvia Pacei, 2014. "Offshoring and Firm Performance: Evidence from the Italian Manufacturing Industry," Review of Development Economics, Wiley Blackwell, vol. 18(1), pages 29-44, February.
    3. Takumi Naito & Ryoji Ohdoi, 2011. "A two-country model of trade and growth with intersectoral knowledge spillovers," Journal of Economics, Springer, vol. 103(1), pages 39-58, May.
    4. Basant Kapur, 2015. "A symmetric Heckscher–Ohlin model of endogenous growth," Journal of Economics, Springer, vol. 116(3), pages 183-209, November.
    5. Yunfang Hu & Murray C. Kemp & Koji Shimomura, 2006. "Endogenous Growth: Fragile Foundations?," Review of Development Economics, Wiley Blackwell, vol. 10(1), pages 113-115, February.

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