Trade, Convergence and Overtaking

Abstract:     
This paper shows the importance of a model's dynamic structure for international trade theory. It shows how, by adding a simple dynamic structure to the standard convex 2×2×2 Heckscher–Ohlin model, the long run implications of international trade can be the reverse of the static ones. It also shows how trade can cause the steady state per capita income in the world economy to rise or fall, how trade can allow one country to catch up and overtake the steady state income of another country and how trade can cause conditional convergence.

Keywords: International Trade, Convergence, Growth

JEL Classification: O40, F11, F43

Accepted Paper Series