A Two-Country Dynamic General Equilibrium Model of Endogenous Growth and International Trade

Junko Doi and Koji Shimomura
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Junko Doi: Graduate School of Economics, Kobe University, Japan

No 123, Discussion Paper Series from Research Institute for Economics & Business Administration, Kobe University

Abstract: We formulate a two(-country) by two(-tradable good) by two(-factor) dynamic general equilibrium model of endogenous growth and international rade that has no market distortion. After deriving the conditions for a balanced growth path with incomplete specialization in both countries to exist and to be locally saddlepoint stable, we show that along the balanced growth paths (i) a dynamic version of the Heckscher-Ohlin Theorem is established, (ii) the relationship between the volume of international trade and the long-run growth rate depends on the factor-intensity ranking between the two sector, and (iii) so does whether the Law of Comparative Advantage holds or not. The Stolper-Samuelson Theorem and the Factor Price Equalization Theorem are shown to hold in a dynamic framework.

Keywords: International trade; Market; Growth rate (search for similar items in EconPapers)
JEL-codes: F10 O41 O47 (search for similar items in EconPapers)
Pages: 10 pages
Date: 2001-06
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Persistent link: https://EconPapers.repec.org/RePEc:kob:dpaper:123

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