Path Interdependence in a Dynamic Two Country Heckscher-Ohlin Model

Gaitan, Beatriz; Roe, Terry L. (September 2007). Path Interdependence in a Dynamic Two Country Heckscher-Ohlin Model (Discussion Papers 07-04). Bern: Department of Economics

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The closed economy neoclassical model predicts lung-run convergence in per-capita income. We show, within a neoclassical framework, that international trade among two countries differing only in their initial capital endowment generates long-run income differences. Our results suggests that trade creates opposite incentives to accumulate capital. Transitionally, the returns to investment with trade are smaller for countries initially less endowed with capital as when compared to their autarchic situation, while the reverse happens for those countries most endowed with capital. Thus, countries starting with relatively less (more) capital end, in the long run, with less (more) capital than in autarchy.

Item Type:

Working Paper

Division/Institute:

03 Faculty of Business, Economics and Social Sciences > Department of Economics

UniBE Contributor:

Gaitan Soto, Beatriz

Subjects:

300 Social sciences, sociology & anthropology > 330 Economics

Series:

Discussion Papers

Publisher:

Department of Economics

Language:

English

Submitter:

Lars Tschannen

Date Deposited:

05 Oct 2020 12:03

Last Modified:

05 Oct 2020 12:03

JEL Classification:

O41, F43, F11

BORIS DOI:

10.7892/boris.145696

URI:

https://boris.unibe.ch/id/eprint/145696

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