Aging, transitional dynamics, and gains from trade

Takumi Naito and Laixun Zhao

No 215, Discussion Paper Series from Research Institute for Economics & Business Administration, Kobe University

Abstract: We formulate a two-country, two-good, two-factor, two-period-lived overlapping generations model to examine how population aging determines the pattern of and gains from trade. We obtain two main results. First, the aging country endogenously becomes a small country exporting the capital-intensive good, whereas the younger country endogenously dominates the world economy determining the world prices, in the free trade steady state. Second, although uncompensated free trade cannot be Pareto superior to autarky, there exists a compensation scheme applied within each country such that free trade is Pareto superior to autarky.

Keywords: Aging and trade; Gains from trade; Overlapping generations model; Transitional dynamics; Compensation scheme (search for similar items in EconPapers)
JEL-codes: F43 J11 O41 (search for similar items in EconPapers)
Pages: 21 pages
Date: 2008-01
New Economics Papers: this item is included in nep-age, nep-dge, nep-int and nep-opm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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https://www.rieb.kobe-u.ac.jp/academic/ra/dp/English/dp215.pdf First version, 2008 (application/pdf)

Related works:
Journal Article: Aging, transitional dynamics, and gains from trade (2009)
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