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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. Sergio Rebelo, 1999. "Long Run Policy Analysis and Long Run Growth," Levine's Working Paper Archive 2114, David K. Levine.
  2. 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.
  3. Jaume Ventura, 1997. "Growth and Interdependence," The Quarterly Journal of Economics, Oxford University Press, vol. 112(1), pages 57-84.
  4. Xavier Sala-I-Martin, 1997. "Transfers, Social Safety Nets, and Economic Growth," IMF Staff Papers, Palgrave Macmillan, vol. 44(1), pages 81-102, March.
  5. anonymous, 1995. "Does the bouncing ball lead to economic growth?," Regional Update, Federal Reserve Bank of Atlanta, issue Jul, pages 1-2, 4-6.
  6. Tallman, Ellis W. & Wang, Ping, 1994. "Human capital and endogenous growth evidence from Taiwan," Journal of Monetary Economics, Elsevier, vol. 34(1), pages 101-124, August.
  7. Ronald Findlay, 1995. "Factor Proportions, Trade, and Growth," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262061759, December.
  8. Paul M Romer, 1999. "Increasing Returns and Long-Run Growth," Levine's Working Paper Archive 2232, David K. Levine.
  9. Robert J. Barro, 1995. "Inflation and Economic Growth," NBER Working Papers 5326, National Bureau of Economic Research, Inc.
  10. Stokey, Nancy L & Rebelo, Sergio, 1995. "Growth Effects of Flat-Rate Taxes," Journal of Political Economy, University of Chicago Press, vol. 103(3), pages 519-50, June.
  11. Stokey, Nancy L, 1996. "Free Trade, Factor Returns, and Factor Accumulation," Journal of Economic Growth, Springer, vol. 1(4), pages 421-47, December.
  12. Ni, Shawn & Wang, Xinghe, 1994. "Human capital and income taxation in an endogenous growth model," Journal of Macroeconomics, Elsevier, vol. 16(3), pages 493-507.
  13. Nancy L. Stokey, 1991. "Human Capital, Product Quality, and Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 106(2), pages 587-616.
  14. Robert J. Barro, 1991. "Economic Growth in a Cross Section of Countries," The Quarterly Journal of Economics, Oxford University Press, vol. 106(2), pages 407-443.
  15. Alwyn Young, 1995. "The Tyranny of Numbers: Confronting the Statistical Realities of the East Asian Growth Experience," The Quarterly Journal of Economics, Oxford University Press, vol. 110(3), pages 641-680.
  16. 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.
  17. 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.
  18. 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..
  19. 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.
  20. 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.
  21. 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.
  22. 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.
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