Uncertain lifetimes and convergence in a two-country Heckscher–Ohlin model

Partha Sen

Mathematical Social Sciences, 2015, vol. 78, issue C, 14-20

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.

Date: 2015
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Working Paper: UNCERTAIN LIFETIMES AND CONVERGENCE IN A TWO-COUNTRY HECKSCHER-OHLIN MODEL (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:matsoc:v:78:y:2015:i:c:p:14-20

DOI: 10.1016/j.mathsocsci.2015.08.002

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