Dynamic Factor Price Equalization & International Income Convergence

Clinton Shiells and Joseph Francois

No 2008/267, IMF Working Papers from International Monetary Fund

Abstract: The paper develops a tractable way to incorporate the micro structure of dual models of international trade into a standard class of dynamic open-economy macro models. In the process, it develops the concept of a dynamic factor price equalization set and an integrated intertemporal equilibrium. A number of results are obtained concerning trade, growth, and income convergence. Countries with higher capital/labor ratios may stay wealthier over time, both in the transition and in the new steady state. Real shocks in one country will be transmitted to the other country through the factor markets and traded goods prices.

Keywords: WP; capital stock (search for similar items in EconPapers)
Pages: 17
Date: 2008-12-01
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Citations: View citations in EconPapers (3)

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