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A two-country dynamic model of international trade and endogenous growth: multiple balanced growth paths and stability

  • Junko Doi

    (Department of Economics, Kansai University, Japan)

  • Kazuo Nishimura

    (Institute of Economic Research Kyoto University (KIER), Japan)

  • Koji Shimomura

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

We formulate a two-country endogenous growth model which explain joint determination of long-run trade patterns and world growth rates. After providing the existence and local stability of the continuum of balanced growth paths, we show that main standard trade propositions hold under some modifications and that, subject to certain conditions concerning social and private rankings of factory intensities between production sectors, the higher is the growth rate, the smaller is the volume of international trade among balanced growth paths in the continuum.

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File URL: http://www.rieb.kobe-u.ac.jp/academic/ra/dp/English/dp188.pdf
File Function: First version, 2006
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Paper provided by Research Institute for Economics & Business Administration, Kobe University in its series Discussion Paper Series with number 188.

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Length: 39 pages
Date of creation: Apr 2006
Date of revision:
Handle: RePEc:kob:dpaper:188
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  1. 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.
  2. Benhabib, Jess & Nishimura, Kazuo, 1996. "Indeterminancy and Sunspots with Constant Returns," Working Papers 96-44, C.V. Starr Center for Applied Economics, New York University.
  3. 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.
  4. Benhabib, J. & Meng, Q. & Nishimura, K., 1999. "Indeterminacy Under Constant Returns to Scale in Multisector Economies," Working Papers 99-17, C.V. Starr Center for Applied Economics, New York University.
  5. 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.
  6. Nishimura, Kazuo & Shimomura, Koji, 2002. "Indeterminacy in a dynamic small open economy," Journal of Economic Dynamics and Control, Elsevier, vol. 27(2), pages 271-281, December.
  7. Roger E. A. Farmer & Amartya Lahiri, 2005. "A Two-Country Model of Endogenous Growth," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 8(1), pages 68-88, January.
  8. Kazuo Nishimura & Koji Shimomura, 2006. "Indeterminacy in a dynamic two-country model," Economic Theory, Springer, vol. 29(2), pages 307-324, October.
  9. Eric W. Bond & Ping Wang & Chong K. Yip, 1993. "A general two sector model of endogenous growth with human and physical capital," Research Paper 9303, Federal Reserve Bank of Dallas.
  10. Benhabib, Jess & Farmer, Roger E.A., 1999. "Indeterminacy and sunspots in macroeconomics," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 6, pages 387-448 Elsevier.
  11. Ventura, Jaume, 1997. "Growth and Interdependence," The Quarterly Journal of Economics, MIT Press, vol. 112(1), pages 57-84, February.
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