UNCERTAIN LIFETIMES AND CONVERGENCE IN A TWO-COUNTRY HECKSCHER-OHLIN MODEL

Partha Sen
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Partha Sen: Centre for Development Economics, Delhi School of Economics, University of Delhi, India

No 246, Working papers from Centre for Development Economics, Delhi School of Economics

Abstract: In a two-country infinite-horizon model, with two traded goods and two factors of production and no international borrowing and lending, there is no convergence of incomes if there is factor-price equalization. With factor-price equalization, the Euler equations of the two economies become identical. I show that in such a set-up if agents have a non-zero probability of death, then we do get convergence. In the steady state the two economies have identical capital-labor ratios and revert to autarky.

Keywords: Convergence; Dynamic Heckscher-Ohlin Model; Factor-Price Equalization; Blanchard-Yaari Model; Capital Accumulation (search for similar items in EconPapers)
JEL-codes: F10 F11 F43 (search for similar items in EconPapers)
Pages: 25 pages
Date: 2015-09
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Uncertain lifetimes and convergence in a two-country Heckscher–Ohlin model (2015)
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