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

Author

Listed:
  • Eric W. Bond

    (Department of Economics, Vanderbilt University)

  • Kathleen Trask

    (Department of Economics, University of Kentucky)

  • Ping Wang

    (Department of Economics, Vanderbilt University)

Abstract

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.

Suggested Citation

  • Eric W. Bond & Kathleen Trask & Ping Wang, 1996. "Factor Accumulation and Trade: Dynamic Comparative Advantage with Endogenous Physical and Human Capital," Vanderbilt University Department of Economics Working Papers 0031, Vanderbilt University Department of Economics, revised Aug 2000.
  • Handle: RePEc:van:wpaper:0031
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    References listed on IDEAS

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    More about this item

    Keywords

    Trade patterns; factor accumulation; endogenous growth;
    All these keywords.

    JEL classification:

    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General
    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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