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

Marion Davin (marion.davin@umontpellier.fr), Karine Gente (karine.gente@univ-amu.fr) and Carine Nourry

Journal of Macroeconomics, 2018, vol. 57, issue C, 166-181

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.

Keywords: Two-sector model; Non-tradable goods; Endogenous growth; Economic integration (search for similar items in EconPapers)
JEL-codes: F15 J24 O41 (search for similar items in EconPapers)
Date: 2018
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jmacro:v:57:y:2018:i:c:p:166-181

DOI: 10.1016/j.jmacro.2018.05.007

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