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

Claustre Bajona and Timothy J. Kehoe ()

No 12567, NBER Working Papers from National Bureau of Economic Research, Inc

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.

JEL-codes: F11 F43 O15 O41 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dev and nep-int
Date: 2006-10
Note: EFG
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Working Paper: Trade, growth, and convergence in a dynamic Heckscher-Ohlin model (2008)
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