How crucial are preferences for non-tradable goods and cross-country sectoral TFP gap for integration?

Marion Davin (), Karine Gente () and Carine Nourry

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Abstract: This paper deals with the effects of economic integration in a 2x 2x 2 model of overlapping generations. We distinguish between a non-tradable and a tradable sector which use human and physical capital. We show that the preference for non-tradable consumption in total consumption expenditure and sectoral productivities are crucial factors to determine which country does benefit from integration in terms of economic growth. Short-run and long-run effects of integration may differ, especially when countries are heterogeneous and when there exist high cross border externalities in education. Moreover, an impatient country may lose to integration when it has a comparative advantage in the tradable sector and/or when the preference for non-tradable goods is high.

Date: 2018
Note: View the original document on HAL open archive server: https://hal.science/hal-01944628v1
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Published in Journal of Macroeconomics, 2018, 57 (C), pp.166-181. ⟨10.1016/j.jmacro.2018.05.007⟩

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Journal Article: How crucial are preferences for non-tradable goods and cross-country sectoral TFP gap for integration? (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-01944628

DOI: 10.1016/j.jmacro.2018.05.007

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