Aging, transitional dynamics, and gains from trade

Takumi Naito () and Laixun Zhao

Journal of Economic Dynamics and Control, 2009, vol. 33, issue 8, pages 1531-1542

Abstract: We formulate a two-country, two-good, two-factor, two-period-lived overlapping generations model to examine how population aging determines the pattern of and gains from trade. Two main results are obtained. First, the aging country endogenously becomes a small country exporting the capital-intensive good, whereas the younger country endogenously dominates the world economy determining the world prices, in the free trade steady state. Second, although uncompensated free trade cannot be Pareto superior to autarky, there exists a compensation scheme applied within each country such that free trade is Pareto superior to autarky.

Keywords: Aging; and; trade; Gains; from; trade; Overlapping; generations; model; Transitional; dynamics; Compensation; scheme (search for similar items in EconPapers)
Date: 2009

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Working Paper: Aging, transitional dynamics, and gains from trade (2008)
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Persistent link: http://EconPapers.repec.org/RePEc:eee:dyncon:v:33:y:2009:i:8:p:1531-1542

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