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Dynamic Factor Price Equalization & International Income Convergence

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Author Info
Joseph Francois
Clinton R. Shiells

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Abstract

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.

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Paper provided by International Monetary Fund in its series IMF Working Papers with number 08/267.

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Length: 17 pages
Date of creation: 04 Dec 2008
Date of revision:
Handle: RePEc:imf:imfwpa:08/267

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Related research
Keywords: Prices ; International trade ; Demand ; Economic growth ; External shocks ; Income ; Spillovers ; Economic models ;

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References listed on IDEAS
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  1. Claustre Bajona & Timothy J. Kehoe, 2006. "Demographics in Dynamic Heckscher-Ohlin Models: Overlapping Generations Versus Infinitely Lived Consumers," NBER Working Papers 12566, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  2. Claustre Bajona & Timothy J. Kehoe, 2008. "Trade, growth, and convergence in a dynamic Heckscher-Ohlin model," Staff Report 378, Federal Reserve Bank of Minneapolis. [Downloadable!]
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  3. Martin Feldstein & Charles Horioka, 1980. "Domestic Savings and International Capital Flows," NBER Working Papers 0310, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  4. Francesco Caselli & Jaume Ventura, 2000. "A Representative Consumer Theory of Distribution," American Economic Review, American Economic Association, vol. 90(4), pages 909-926, September. [Downloadable!] (restricted)
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  5. Manning, Richard & Markusen, James R, 1991. "National Product Functions in Comparative Steady-State Analysis," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 32(3), pages 613-25, August. [Downloadable!] (restricted)
    Other versions:
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