We thank three very professional and helpful referees for comments that greatly improved the paper and also Areendam Chanda, Robert Kane, and Pietro Peretto for earlier comments and suggestions.
ECONOMIC GROWTH WITH TRADE IN FACTORS OF PRODUCTION
Article first published online: 22 JAN 2014
© (2014) by the Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association
International Economic Review
Volume 55, Issue 1, pages 223–254, February 2014
How to Cite
YENOKYAN, K., SEATER, J. J. and ARABSHAHI, M. (2014), ECONOMIC GROWTH WITH TRADE IN FACTORS OF PRODUCTION. International Economic Review, 55: 223–254. doi: 10.1111/iere.12047
- Issue published online: 22 JAN 2014
- Article first published online: 22 JAN 2014
- Manuscript Revised: MAY 2012
- Manuscript Received: MAY 2011
We study the world trading equilibrium in a Ricardian model, where factors of production are produced and traded. Even in the absence of technology transfer, international investment, research and development, and aggregate scale effects, trade affects economic growth through comparative advantage. Trade may raise the growth rate or leave it unchanged, depending on the patterns of comparative and absolute advantage. Trade in factors of production can effectively equalize technology even when technology transfer does not occur. Factor price equalization may hold, but the Stolper–Samuelson and Rybczynski theorems do not. The transition dynamics can be monotonic or oscillatory.