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Demographics in Dynamic Heckscher-Ohlin Models: Overlapping Generations versus Infinitely Lived Consumers

  • Claustre Bajona

    (Ryerson University)

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    This paper contrasts the properties of dynamic Heckscher-Ohlin models with overlapping generations with those of models with infinitely lived consumers. In both environments, if capital is mobile across countries, factor price equalization occurs after the initial period. In general, however, the properties of equilibria differ drastically across environments: With infinitely lived consumers, we find that factor prices equalize in any steady state or cycle and that, in general, there is positive trade in any steady state or cycle. With overlapping generations, in contrast, we construct examples with steady states and cycles in which factor prices are not equalized, and we find that any equilibrium that converges to a steady state or cycle with factor price equalization has no trade after a finite number of periods.

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    File URL: https://www.economicdynamics.org/meetpapers/2010/paper_1172.pdf
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    Paper provided by Society for Economic Dynamics in its series 2010 Meeting Papers with number 1172.

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    Date of creation: 2010
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    Handle: RePEc:red:sed010:1172
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    1. Claustre Bajona & Timothy Kehoe, 2010. "Trade, Growth, and Convergence in a Dynamic Heckscher-Ohlin Model," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 13(3), pages 487-513, July.
    2. Timothy J Kehoe & David K Levine, 1985. "Comparative Statics and Perfect Foresight in Infinite Horizon Economies," Levine's Working Paper Archive 1873, David K. Levine.
    3. Markusen, James R., 1983. "Factor movements and commodity trade as complements," Journal of International Economics, Elsevier, vol. 14(3-4), pages 341-356, May.
    4. Bianconi, Marcelo, 1995. "On dynamic real trade models," Economics Letters, Elsevier, vol. 47(1), pages 47-52, January.
    5. Kemp, Murray C & Wong, Kar-yiu, 1995. "Gains from Trade with Overlapping Generations," Economic Theory, Springer, vol. 6(2), pages 283-303, July.
    6. Baxter, Marianne, 1992. "Fiscal Policy, Specialization, and Trade in the Two-Sector Model: The Return of Ricardo?," Journal of Political Economy, University of Chicago Press, vol. 100(4), pages 713-44, August.
    7. Sayan, Serdar, 2005. "Heckscher-Ohlin revisited: implications of differential population dynamics for trade within an overlapping generations framework," Journal of Economic Dynamics and Control, Elsevier, vol. 29(9), pages 1471-1493, September.
    8. Larry E. Jones & Rodolfo E. Manuelli, 1990. "Finite Lifetimes and Growth," NBER Working Papers 3469, National Bureau of Economic Research, Inc.
    9. Pablo Serra, 1991. "Short-run and Long-run Welfare Implications of Free Trade," Canadian Journal of Economics, Canadian Economics Association, vol. 24(1), pages 21-33, February.
    10. Francesc Obiols-Homs, 2002. "Trade Effects on the Personal Distribution of Wealth," Working Papers 0208, Centro de Investigacion Economica, ITAM.
    11. Partha Chatterjee & Malik Shukayev, 2006. "Convergence in a Stochastic Dynamic Heckscher-Ohlin Model," Working Papers 06-23, Bank of Canada.
    12. Fisher, Eric ON., 1992. "Sustained growth in the model of overlapping generations," Journal of Economic Theory, Elsevier, vol. 58(1), pages 77-92, October.
    13. Gokcekus, Omer & Tower, Edward, 1998. "Does Trade Liberalization Benefit Young and Old Alike?," Review of International Economics, Wiley Blackwell, vol. 6(1), pages 50-58, February.
    14. Boldrin, Michele & Montrucchio, Luigi, 1986. "On the indeterminacy of capital accumulation paths," Journal of Economic Theory, Elsevier, vol. 40(1), pages 26-39, October.
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