Dynamic Factor Price Equalization & International Income Convergence

19 Pages Posted: 18 Dec 2008

See all articles by Joseph F. Francois

Joseph F. Francois

University of Bern - Department of Economics; Centre for Economic Policy Research (CEPR); Vienna Institute of International Economic Studies (WIIW); University of Adelaide - School of Economics

Clinton R. Shiells

International Monetary Fund (IMF)

Date Written: December 2008

Abstract

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.

Keywords: Prices, International trade, Demand, Economic growth, External shocks, Income, Spillovers, Economic models

Suggested Citation

Francois, Joseph F and Shiells, Clinton R., Dynamic Factor Price Equalization & International Income Convergence (December 2008). IMF Working Papers, Vol. , pp. 1-17, 2008. Available at SSRN: https://ssrn.com/abstract=1316735

Joseph F Francois (Contact Author)

University of Bern - Department of Economics ( email )

Schanzeneckstrasse 1
Bern, CH-3001
Switzerland

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Vienna Institute of International Economic Studies (WIIW) ( email )

Oppolzergasse 6
A-1010 Vienna
Austria

University of Adelaide - School of Economics ( email )

Adelaide SA, 5005
Australia
+61 8 8303 5540 (Phone)
+61 8 8223 1460 (Fax)

Clinton R. Shiells

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
61
Abstract Views
558
rank
351,800
PlumX Metrics