Per Capita Income Convergence and the Role of International Trade

12 Pages Posted: 19 Jul 2000 Last revised: 5 Oct 2010

See all articles by Matthew J. Slaughter

Matthew J. Slaughter

Dartmouth College - Tuck School of Business; National Bureau of Economic Research (NBER)

Date Written: January 1997

Abstract

The recent literature on cross-country convergence of per capita income has largely ignored international trade. The reason might be perspective. Most convergence papers frame the analysis in a `Solow world' in which countries exist independent of one another. But most international trade economists have a very different perspective of a world in which countries exchange goods, factors, and ideas. The goal of this paper is to sketch out some basic relationships between per capita income convergence and international trade. First, I briefly summarize a few interesting recent papers which have linked income convergence to trade. Their common inference is that for countries which are both somehow linked by trade and converging, trade helps cause the convergence. Second, I critique these papers in light of some simple accounting and trade theory. The key point here is that countries trading is not sufficient proof that trade helps cause per capita income convergence. Finally, I give two examples applying some of these ideas to real-world data. The basic point of the paper is that more work is needed to document carefully both the exact mechanisms by which trade helps convergence and the relative contribution of trade and non-trade factors.

Suggested Citation

Slaughter, Matthew J., Per Capita Income Convergence and the Role of International Trade (January 1997). NBER Working Paper No. w5897. Available at SSRN: https://ssrn.com/abstract=225679

Matthew J. Slaughter (Contact Author)

Dartmouth College - Tuck School of Business ( email )

Hanover, NH 03755
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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