Capital Markets and Dimension in Neoclassical Models of Growth with Trade

Emily Cremers

Staff General Research Papers from Iowa State University, Department of Economics

Abstract: This paper explores the role of arbitrary assumptions regarding dimension and thetradeability of capital in neoclassical growth models. It is shown that international marketsfor physical and financial capital are required to reproduce the competitive world growthpath only when the number of traded (non-capital) goods is less than the number of factors,provided that countries are diversified along their growth paths. Capital markets compensatefor lacking consumption good markets in models with low dimension, thus reinforcing anearlier static argument that trade theory requires a sufficient number of markets, rather thanparticular dimensional attributes.

Keywords: Capital Mobility; Heckscher-Ohlin; Dimensionality; Overlapping Generations; Integrated World Economy (search for similar items in EconPapers)
Date: 1997-01-27
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Published in Journal of International Economics 1997, vol. 43 no. 1/2, pp. 155-172

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Persistent link: http://EconPapers.repec.org/RePEc:isu:genres:34865

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