Dynamic Factor Price Equalization & International Income Convergence

Author/Editor:

Clinton R. Shiells ; Joseph F. Francois

Publication Date:

December 1, 2008

Electronic Access:

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Summary:

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.

Series:

Working Paper No. 2008/267

Subject:

Capital accumulation Consumption Income Labor Stocks

English

Publication Date:

December 1, 2008

ISBN/ISSN:

9781451871258/1018-5941

Stock No:

WPIEA2008267

Pages:

17

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