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How crucial are preferences for non-tradable goods and cross-country sectoral TFP gap for integration?

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  • Davin, Marion
  • Gente, Karine
  • Nourry, Carine

Abstract

This paper deals with the effects of economic integration in a 2x 2x 2 model of overlapping generations. We distinguish between a non-tradable and a tradable sector which use human and physical capital. We show that the preference for non-tradable consumption in total consumption expenditure and sectoral productivities are crucial factors to determine which country does benefit from integration in terms of economic growth. Short-run and long-run effects of integration may differ, especially when countries are heterogeneous and when there exist high cross border externalities in education. Moreover, an impatient country may lose to integration when it has a comparative advantage in the tradable sector and/or when the preference for non-tradable goods is high.

Suggested Citation

  • Davin, Marion & Gente, Karine & Nourry, Carine, 2018. "How crucial are preferences for non-tradable goods and cross-country sectoral TFP gap for integration?," Journal of Macroeconomics, Elsevier, vol. 57(C), pages 166-181.
    • Handle: RePEc:eee:jmacro:v:57:y:2018:i:c:p:166-181
    DOI: 10.1016/j.jmacro.2018.05.007
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    More about this item

    Keywords

    Two-sector model; Non-tradable goods; Endogenous growth; Economic integration;
    All these keywords.

    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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