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Uncertain Lifetimes And Convergence In A Two-Country Heckscher-Ohlin Model

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  • Partha Sen

    (Centre for Development Economics, Delhi School of Economics, University of Delhi, India)

Abstract

In a two-country infinite-horizon model, with two traded goods and two factors of production and no international borrowing and lending, there is no convergence of incomes if there is factor-price equalization. With factor-price equalization, the Euler equations of the two economies become identical. I show that in such a set-up if agents have a non-zero probability of death, then we do get convergence. In the steady state the two economies have identical capital-labor ratios and revert to autarky.

Suggested Citation

  • Partha Sen, 2015. "Uncertain Lifetimes And Convergence In A Two-Country Heckscher-Ohlin Model," Working papers 246, Centre for Development Economics, Delhi School of Economics.
    • Handle: RePEc:cde:cdewps:246
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    Cited by:

    1. Partha Sen & Koji Shimomura, 2017. "Convergence and Overtaking in a Dynamic two Country Model," Open Economies Review, Springer, vol. 28(1), pages 107-124, February.

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    More about this item

    Keywords

    Convergence; Dynamic Heckscher-Ohlin Model; Factor-Price Equalization; Blanchard-Yaari Model; Capital Accumulation;
    All these keywords.

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies

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