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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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  • Junko Doi & Kazuo Nishimura & Koji Shimomura, 2006. "A two-country dynamic model of international trade and endogenous growth: multiple balanced growth paths and stability," Discussion Paper Series 188, Research Institute for Economics & Business Administration, Kobe University.
  • Handle: RePEc:kob:dpaper:188

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    References listed on IDEAS

    1. 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, August.
    2. Zhiqi Chen, 1992. "Long-Run Equilibria in a Dynamic Heckscher-Ohlin Model," Canadian Journal of Economics, Canadian Economics Association, vol. 25(4), pages 923-943, November.
    3. Jess Benhabib & Qinglai Meng & Kazuo Nishimura, 2000. "Indeterminacy under Constant Returns to Scale in Multisector Economies," Econometrica, Econometric Society, vol. 68(6), pages 1541-1548, November.
    4. 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.
    5. 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.
    6. Jaume Ventura, 1997. "Growth and Interdependence," The Quarterly Journal of Economics, Oxford University Press, vol. 112(1), pages 57-84.
    7. Bond, Eric W. & Wang, Ping & Yip, Chong K., 1993. "A general two sector model of endogenous growth with human and physical capital," Working Papers 9303, Federal Reserve Bank of Dallas.
    8. 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.
    9. Benhabib, Jess & Nishimura, Kazuo, 1998. "Indeterminacy and Sunspots with Constant Returns," Journal of Economic Theory, Elsevier, vol. 81(1), pages 58-96, July.
    10. 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.
    11. 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.
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    Cited by:

    1. Wei-Bin Zhang, 2014. "National and International Inequalities in Income and Wealth in a Global Growth with Free Trade and National Inflation Policies," Global Economic Observer, "Nicolae Titulescu" University of Bucharest, Faculty of Economic Sciences;Institute for World Economy of the Romanian Academy, vol. 2(1), pages 22-40, May.
    2. Lee, Shun-Fa, 2010. "Tariff, Growth, and Welfare," MPRA Paper 27486, University Library of Munich, Germany.
    3. Eric Bond & Kazumichi Iwasa & Kazuo Nishimura, 2011. "A dynamic two country Heckscher–Ohlin model with non-homothetic preferences," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 48(1), pages 171-204, September.
    4. 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.

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