Trade and the Speed of Convergence
E. Young Song ()
No 1006, Working Papers from Research Institute for Market Economy, Sogang University
This paper derives a convergence equation for a world integrated by trade. We find that factor price equalization reduces the rate of income convergence among economies with identical preferences and identical technologies. This finding hold true both in neoclassical growth models and in endogenous growth models with human capital accumulation. The integrated world model can explain low rates of convergence frequently observed in empirical studies without resorting to a large income share of capital, constraints on international borrowing, or adjustment costs in investment.
Keywords: convergence; factor price equalization; growth; integration; trade (search for similar items in EconPapers)
JEL-codes: F43 O41 (search for similar items in EconPapers)
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ftp://220.127.116.11/wpaper/SEY_RIME_2010-06.pdf First version, 2010 (application/pdf)
Journal Article: Trade and the Speed of Convergence (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:sgo:wpaper:1006
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