Heckscher-Ohlin Business Cycles

Marco Maffezzoli and Cuñat, Alejandro
Authors registered in the RePEc Author Service: Alejandro Cunat

No 3728, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We present a neoclassical two-country dynamic trade model in which moderate reductions in trade costs can generate sizable increases in trade volumes over time. In our setup, a fall in trade costs has two effects on the volume of trade. First, for given factor endowments, it raises the degree of specialization of countries, leading to a larger volume of trade in the short run. Second, it raises (lowers) the factor price of each country?s abundant (scarce) production factor, leading to diverging paths of relative factor endowments across countries and a rising degree of specialization. This creates an additional effect on the future volume of trade that adds to the static and dynamic effects of future falls in trade costs. A simulation exercise shows that a fall in trade costs over time produces an exponential increase in the trade share of output, much in line with the data.

Keywords: International trade; Heckscher-ohlin (search for similar items in EconPapers)
JEL-codes: F10 F40 (search for similar items in EconPapers)
Date: 2003-02
New Economics Papers: this item is included in nep-mac
References: Add references at CitEc
Citations:

Downloads: (external link)
https://cepr.org/publications/DP3728 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

Related works:
Journal Article: Hecksher-Ohlin Business Cycles (2004)
Working Paper: Heckscher-Ohlin Business Cycles (2002)
Working Paper: Heckscher-Ohlin Business Cycles
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:cpr:ceprdp:3728

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP3728

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().