Work

Trade, Growth, and Convergence in a Dynamic Heckscher-Ohlin Model

Year: 2006

Type: report

Abstract: This paper studies the properties of a dynamic Heckscher-Ohlin model -a combination of a static two-good, two-factor Heckscher-Ohlin trade model and a two-sector growth model -with infinitely lived consumers where international borrowing and lending are not permitted.We obtain two main results: First, even if factor prices are equalized, countries that differ only in their initial endowments of capital per worker may converge or diverge in income levels over time, depending on the elasticity of substitution between traded goods.Divergence can occur for parameter values that would imply convergence in a world of closed economies and vice versa.Second, factor price equalization in a given period does not imply factor price equalization in future periods.

Source: National Bureau of Economic Research

DOI: 10.3386/w12567

Authors: Claustre Bajona, Timothy Kehoe

Institutions: University of Minnesota, National Bureau of Economic Research, Federal Reserve Bank of Minneapolis, University of Miami, Universitat Pompeu Fabra, University of Minnesota System, The University of Texas at Austin, Stanford University

Language: English

Topic: Global trade and economics

Subfield: General Economics, Econometrics and Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

SDG: Reduced inequalities

Open Access status: green

Funder: National Science Foundation

OpenAlex ID: W4292896084

Cites: 22

Cited by: 12

Related to: 10