The effects of home bias in a model of endogenous growth

Eric Bond, Kazumichi Iwasa and Kazuo Nishimura

International Journal of Development and Conflict, 2011, vol. 1, issue 3, 339-354

Abstract: We examine the effects of home bias in preferences in a two country model of endogenous growth without markets for international lending and borrowing. We show that the presence of a consumer preference for domestic goods can result in a multiplicity of prices consistent with trade balance when the elasticity of substitution between goods is sufficiently low. However, the uniqueness condition is always satisfied when home bias is due to transport costs. We derive conditions for existence, uniqueness, and saddle path stability of the balanced growth path. We also examine the effect of home bias on the terms of trade and the speed of convergence to the balanced growth path.

Keywords: Home bias in trade; endogenous growth; balanced growth path (search for similar items in EconPapers)
Date: 2011
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.worldscientific.com/doi/pdf/10.1142/S201026901100021X

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:gok:ijdcv1:v:1:y:2011:i:3:p:339-354

Ordering information: This journal article can be ordered from
http://www.ijdc.org.in/issues.html

Access Statistics for this article

International Journal of Development and Conflict is currently edited by Partha Gangopadhyay

More articles in International Journal of Development and Conflict from Gokhale Institute of Politics and Economics Contact information at EDIRC.
Bibliographic data for series maintained by ().