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Time Preference and Income Convergence in a Dynamic Heckscher–Ohlin Model

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  • Taketo Kawagishi
  • Kazuo Mino

Abstract

This paper shows that income convergence in an open-economy setting hinges upon how the time-discount rate of the households is determined. As opposed to the case of constant time-discount rate where cross-country income divergence may emerge, the small-open economy may catch up with the rest of the world if the discount rate increases with consumption. In contrast, either if the discount rate decreases with consumption or if future-oriented investment of the household lowers the time- discount rate, then the small-open economy fails to catch up with the rest of the world under free trade of commodities.
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  • Taketo Kawagishi & Kazuo Mino, 2016. "Time Preference and Income Convergence in a Dynamic Heckscher–Ohlin Model," Review of International Economics, Wiley Blackwell, vol. 24(3), pages 592-603, August.
    • Handle: RePEc:bla:reviec:v:24:y:2016:i:3:p:592-603
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    Cited by:

    1. Yunfang Hu & Kazuo Mino, 2014. "Capital Accumulation and Structural Change in a Small Open Economy," Pacific Economic Review, Wiley Blackwell, vol. 19(5), pages 634-656, December.
    2. Been-Lon Chen & Yunfang Hu & Kazuo Mino, 2016. "Stabilization Effects of Taxation Rules in Small-Open Economies with Endogenous Growth," KIER Working Papers 946, Kyoto University, Institute of Economic Research.

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    More about this item

    JEL classification:

    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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