Long-Run Equilibria in a Dynamic Heckscher-Ohlin Model

Zhiqi Chen

Canadian Journal of Economics, 1992, vol. 25, issue 4, 923-43

Abstract: The goal of this paper is to study long-run equilibria in open economies using a new dynamic Heckscher-Ohlin model with endogenous savings and endogenous labor supply. The long-run equilibria in this model exhibit the property of economic hysteresis. The model offers a Heckscher-Ohlin type explanation for the long-run trade between countries with identical preferences; that is, a difference in factor endowment ratios in the initial period causes trade to continue in the long run. It is shown that factors other than differences in preferences can lead to a difference in savings rates among countries.

Date: 1992
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