Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/76777
Authors: 
Gaitan, Beatriz
Roe, Terry L.
Year of Publication: 
2007
Series/Report no.: 
Discussion Papers, Department of Economics, Universität Bern 07-04
Abstract: 
The closed economy neoclassical model predicts lung-run convergence in per-capita income. We show, within a neoclassical framework, that international trade among two countries differing only in their initial capital endowment generates long-run income differences. Our results suggests that trade creates opposite incentives to accumulate capital. Transitionally, the returns to investment with trade are smaller for countries initially less endowed with capital as when compared to their autarchic situation, while the reverse happens for those countries most endowed with capital. Thus, countries starting with relatively less (more) capital end, in the long run, with less (more) capital than in autarchy.
Subjects: 
International trade
Development
Multiple Equilibria
JEL: 
O41
F43
F11
Document Type: 
Working Paper

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