Dynamic Factor Price Equalization & International Income Convergence

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.
Publication date: December 2008
ISBN: 9781451871258
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Topics covered in this book

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International - Economics , Neoclassical Models of Trade , Economic Growth of Open Economies , Cross Country Output Convergence , capital stock , factor price , intermediate goods , factor price equalization , Cross-Country Output Convergence

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