TY  - JOUR
AU  - Bajona,Claustre
AU  - Kehoe,Timothy J.
TI  - Trade, Growth, and Convergence in a Dynamic Heckscher-Ohlin Model
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 12567
PY  - 2006
Y2  - October 2006
UR  - http://www.nber.org/papers/w12567
L1  - http://www.nber.org/papers/w12567.pdf
N1  - Author contact info:
Claustre Bajona
Department of Economics
5250 University Drive
Coral Gables, FL 33124-6550
E-Mail: cbajona@exchange.sba.miami.edu

Timothy J. Kehoe
University of Minnesota
Department of Economics
1925 Fourth Street South
Minneapolis, MN 55455-0462
Tel: 612/625-1589
Fax: 612/204-5515
E-Mail: tkehoe@umn.edu
AB  - This paper studies the properties of a dynamic Heckscher-Ohlin model - a combination of a static two-good, two-factor Heckscher-Ohlin trade model and a two-sector growth model - with infinitely lived consumers where international borrowing and lending are not permitted.  We obtain two main results:  First, even if factor prices are equalized, countries that differ only in their initial endowments of capital per worker may converge or diverge in income levels over time, depending on the elasticity of substitution between traded goods.  Divergence can occur for parameter values that would imply convergence in a world of closed economies and vice versa.  Second, factor price equalization in a given period does not imply factor price equalization in future periods.
ER  -