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Factor Accumulation and Trade: Dynamic Comparative Advantage with Endogenous Physical and Human Capital

  • Eric W. Bond

    ()

    (Department of Economics, Vanderbilt University)

  • Kathleen Trask

    (Department of Economics, University of Kentucky)

  • Ping Wang

    ()

    (Department of Economics, Vanderbilt University)

This paper develops a two country endogenous growth model with accumulation of both physical and human capital. We establish the existence of two country balanced growth equilibria in which physical and human capital grow at the same rate in each country but physical/human capital ratios differ across countries. These balanced growth equilibria satisfy a static and dynamic version of the Heckscher-Ohlin theorem. We also show the existence of unbalanced growth equilibria in which the static and dynamic Hechscher-Ohlin theorems can be violated. The multiplicity of paths with international trade results from the intertemporal no arbitrage condition in cases where trade results in an equalization of factor prices across countries.

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File URL: http://www.accessecon.com/pubs/VUECON/vu00-w31.pdf
File Function: Revised version, 2000
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Paper provided by Vanderbilt University Department of Economics in its series Vanderbilt University Department of Economics Working Papers with number 0031.

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Date of creation: Oct 1996
Date of revision: Aug 2000
Handle: RePEc:van:wpaper:0031
Contact details of provider: Web page: http://www.vanderbilt.edu/econ/wparchive/index.html

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  1. Rebelo, Sergio, 1991. "Long-Run Policy Analysis and Long-Run Growth," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 500-521, June.
  2. Nancy L. Stokey & Sergio Rebelo, 1993. "Growth Effects of Flat-Rate Taxes," NBER Working Papers 4426, National Bureau of Economic Research, Inc.
  3. Nancy L. Stokey, 1990. "Human Capital, Product Quality, And Growth," NBER Working Papers 3413, National Bureau of Economic Research, Inc.
  4. Deardorff, Alan V & Hanson, James A, 1978. "Accumulation and a Long-Run Heckscher-Ohlin Theorem," Economic Inquiry, Western Economic Association International, vol. 16(2), pages 288-92, April.
  5. Caballe, Jordi & Santos, Manuel S, 1993. "On Endogenous Growth with Physical and Human Capital," Journal of Political Economy, University of Chicago Press, vol. 101(6), pages 1042-67, December.
  6. Barro, R.J., 1989. "Economic Growth In A Cross Section Of Countries," RCER Working Papers 201, University of Rochester - Center for Economic Research (RCER).
  7. Romer, Paul M., 1990. "Human capital and growth: Theory and evidence," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 32(1), pages 251-286, January.
  8. Ronald Findlay, 1995. "Factor Proportions, Trade, and Growth," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262061759, June.
  9. Jones, Larry E & Manuelli, Rodolfo E, 1990. "A Convex Model of Equilibrium Growth: Theory and Policy Implications," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 1008-38, October.
  10. Stokey, Nancy L, 1996. " Free Trade, Factor Returns, and Factor Accumulation," Journal of Economic Growth, Springer, vol. 1(4), pages 421-47, December.
  11. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
  12. Ellis W. Tallman & Ping Wang, 1990. "Human capital and endogenous growth: evidence from Taiwan," Working Paper 90-9, Federal Reserve Bank of Atlanta.
  13. Eric W. Bond & Ping Wang & Chong K. Yip, 1993. "A general two-sector model of endogenous growth with human and physical capital: balanced growth and transitional dynamics," Research Paper 9324, Federal Reserve Bank of Dallas.
  14. Trefler, Daniel, 1993. "International Factor Price Differences: Leontief Was Right!," Journal of Political Economy, University of Chicago Press, vol. 101(6), pages 961-87, December.
  15. Stiglitz, Joseph E, 1970. "Factor Price Equalization in a Dynamic Economy," Journal of Political Economy, University of Chicago Press, vol. 78(3), pages 456-88, May-June.
  16. Findlay, Ronald, 1970. "Factor Proportions and Comparative Advantage in the Long Run," Journal of Political Economy, University of Chicago Press, vol. 78(1), pages 27-34, Jan.-Feb..
  17. Findlay, Ronald & Kierzkowski, Henryk, 1983. "International Trade and Human Capital: A Simple General Equilibrium Model," Journal of Political Economy, University of Chicago Press, vol. 91(6), pages 957-78, December.
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