Hostname: page-component-586b7cd67f-2brh9 Total loading time: 0 Render date: 2024-11-26T08:06:16.004Z Has data issue: false hasContentIssue false
  • English
  • Français

INTERGENERATIONAL WELFARE AND TRADE

Published online by Cambridge University Press:  23 November 2005

EMILY T. CREMERS
EMILY T. CREMERS
Affiliation:
National University of Singapore
Get access Rights & Permissions [Opens in a new window]

Abstract

This paper examines the dynamic effects of international commodity trade by merging two benchmark environments, namely, the static factor endowments model and the neoclassical growth model. Two main questions are asked. First, how does commodity trade affect the capital-accumulation paths of two trade partners? Second, do the welfare effects associated with these dynamics serve to reinforce or mitigate the well-known welfare effects associated with the static factor endowments model? It is demonstrated that trade will eventually, if not immediately, narrow the difference in domestic capital accumulation paths. This narrowing introduces a negative welfare effect that is large enough to worsen overall welfare for the country whose capital accumulation has declined. Thus, although the dynamic effects of trade are large enough to dominate the static effects, they do not reinforce the concept of mutually advantageous trade.

Keywords

Gains from TradeNeoclassical GrowthOverlapping Generations
Type
ARTICLES
Information
Macroeconomic Dynamics , Volume 9 , Issue 5 , November 2005 , pp. 585 - 611
Copyright
© 2005 Cambridge University Press

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Azariadis Costas 1996 The economics of poverty traps part one: complete markets. Journal of Economic Growth 1 (4), 449– 496.Google Scholar
Bental Benjamin 1985 Is capital mobility always desirable? a welfare analysis of portfolio autarky in a growing economy. International Economic Review 26 (1), 203– 212.Google Scholar
Buiter Willem H. 1981 Time preference and international lending and borrowing in an overlapping generations model. Journal of Political Economy 89, 769– 797.Google Scholar
Carroll Christopher, Jody Overland, and David Weil 2000 Saving and growth with habit formation. American Economic Review 90 (3), 341– 355.Google Scholar
Cremers Emily T. 2001 General equilibrium with trade balance and real interest rate parity. Economic Theory 17 (3), 641– 663.Google Scholar
Cremers Emily T. 2005 Dynamic efficiency in a two-sector overlapping generations model. Journal of Economic Dynamics and Control, Forthcoming.Google Scholar
Eaton Jonathan 1987 A dynamic specific factors model of international trade. Review of Economic Studies 54, 325– 338.Google Scholar
Findlay Ronald 1984 Growth and development in trade models. In Ronald W. Jones and Peter B. Kenen (eds.), Handbook of International Economics Volume 1: International Trade, pp. 185– 236. Amsterdam: Elsevier Science.
Fisher Eric O'N. 1995 Growth, trade and international transfers. Journal of International Economics 39, 143– 58.Google Scholar
Fried Joel 1980 The intergenerational distribution of the gains from technical change and from international trade. Canadian Journal of Economics XIII (1), 65– 81.Google Scholar
Gale David 1971 General equilibrium with imbalance of trade. Journal of International Economics 1, 141– 158.Google Scholar
Gale David 1974 The trade imbalance story. Journal of International Economics 4, 119– 137.Google Scholar
Galor Oded 1986 Time preference and international labor migration. Journal of Economic Theory 38, 1– 20.Google Scholar
Galor Oded 1992 A two-sector overlapping generations model: a global characterization of the dynamical system. Econometrica 60 (6), 1351– 1386.Google Scholar
Galor Oded 1994 Tariffs, income distribution and welfare in a small overlapping-generations economy. International Economic Review 35 (1), 173– 192.Google Scholar
Galor Oded 1996 Convergence? inferences from theoretical models. Economic Journal 106 (437), 1056– 1069.Google Scholar
Galor Oded and Omer Moav 2002 Natural selection and the origin of economic growth. Quarterly Journal of Economics 117 (4), 1133– 1191.Google Scholar
Galor Oded and H. M. Polemarchakis 1987 Intertemporal equilibrium and the transfer paradox. Review of Economic Studies 54, 147– 156.Google Scholar
Kareken John and Neil Wallace 1977 Portfolio autarky: a welfare analysis. Journal of International Economics 7, 19– 43.Google Scholar
Kemp Murray C. and Kar-yiu Wong 1995 Gains from trade with overlapping generations. Economic Theory 6, 283– 303.Google Scholar
Matsuyama Kiminori 1988a Life-cycle saving and comparative advantage in the long run. Economics Letters 28, 375– 379.Google Scholar
Matsuyama Kiminori 1988b Terms of trade, factor intensities and the current account in a life-cycle model. Review of Economic Studies 55, 247– 262.Google Scholar
Matsuyama Kiminori 1991 Immiserizing growth in Diamond's overlapping gernations model: A geometrical exposition. International Economic Review 32 (1), 251– 265.Google Scholar
Mountford Andrew 1998 Trade, convergence and overtaking. Journal of International Economics 46 (1), 167– 82.Google Scholar
Serra Pablo 1991 Short-run and long-run welfare implications of free trade. Canadian Journal of Economics XXIV (1), 21– 33.Google Scholar
Smith Alasdair 1984 Capital theory and trade theory. In Ronald W. Jones and Peter B. Kenen (eds.), Handbook of International Economics Volume 1: International Trade, pp. 185– 236. Amsterdam: Elsevier Science.
Stiglitz Joseph E. 1970 Factor price equalization in a dynamic economy. Journal of Political Economy 78, 456– 488.Google Scholar