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The International Economics of Transitional Growth: The Case of the United States

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  • Laurence J. Kotlikoff
  • Edward E. Leamer
  • Jeffrey Sachs

Abstract

This paper develops a general equilibrium two country, two commodity dynamic simulation model of international trade in commodities and financial claims. The model generalizes the Heckscher-Ohlin static theory of trade by incorporating costs of quickly adjusting levels of capital stocks in particular industries; i.e., capital mobility in the short run is permitted, but at a price. The model predicts Heckscher-Ohlin relationships, including factor price equalization, in the long-run, but not during the economy's transition path to its ultimate steady-state. An interesting feature of the model is that it provides a determinate solution to the long-run inter- national allocation of the world's capital stock. This is true despite the fact that the Rybchinski-theorem holds in the long-run. The simulation model of international trade with costly capital stock adjustment appears capable of explaining many features of the patterns of factor price equalization, international investment, and changes in comparative advantage that have characterized the post-war period.

Suggested Citation

  • Laurence J. Kotlikoff & Edward E. Leamer & Jeffrey Sachs, 1981. "The International Economics of Transitional Growth: The Case of the United States," NBER Working Papers 0773, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:0773
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    References listed on IDEAS

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    1. Joseph E. Stiglitz, 1980. "On the Almost Neutrality of Inflation: Notes on Taxation and the Welfare Costs of Inflation," NBER Working Papers 0499, National Bureau of Economic Research, Inc.
    2. David Lipton & James M. Poterba & Jeffrey Sachs & Lawrence H. Summers, 1983. "Multiple Shooting in Rational Expectations Models," NBER Technical Working Papers 0003, National Bureau of Economic Research, Inc.
    3. Jeffrey D. Sachs, 1980. "Energy and Growth under Flexible Exchange Rates: A Simulation Study," NBER Working Papers 0582, National Bureau of Economic Research, Inc.
    4. David Lipton & Jeffrey Sachs, 1980. "Accumulation and Growth in a Two-Country Model: A Simulation Approach," NBER Working Papers 0572, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Alan J. Auerbach & Laurence J. Kotlikoff, 1982. "Investment versus Savings Incentives: The Size of the Bang for the Buck and the Potential for Self-Financing Business Tax Cuts," NBER Working Papers 1027, National Bureau of Economic Research, Inc.
    2. Laurence J. Kotlikoff & Edward E. Leamer, 1987. "Empirical Tests of Alternative Models of International Growth," NBER Chapters,in: Trade and Structural Change in Pacific Asia, pages 227-270 National Bureau of Economic Research, Inc.
    3. K. Doroodian & Chulho Jung, 1995. "Factor price equalization: revisited," Applied Economics Letters, Taylor & Francis Journals, vol. 2(7), pages 223-226.

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