This is a much-revised version of invited presentations at the Queen Mary, University of London Workshop at Goodenough College, London in April 2011 and at the Asia Pacific Economic Forum in Tehran in October 2011.
Capital Accumulation and Convergence in a Small Open Economy
Version of Record online: 15 AUG 2013
© 2013 John Wiley & Sons Ltd
Review of International Economics
Volume 21, Issue 4, pages 690–704, September 2013
How to Cite
Sen, P. (2013), Capital Accumulation and Convergence in a Small Open Economy. Review of International Economics, 21: 690–704. doi: 10.1111/roie.12064
- Issue online: 15 AUG 2013
- Version of Record online: 15 AUG 2013
Outward-oriented economies seem to grow faster than inward-looking ones. Does the literature on convergence have anything to say on this? In the dynamic Heckscher–Ohlin–Samuelson model, with factor-price equalization, there is no convergence of incomes. This is because with identical preferences and return to capital, irrespective of initial levels, the growth rates of consumption are the same. In the specific factors' model, there is factor-price equalization in the long run, but incomes depend on endowments of non-accumulable factors. Different specifications for the intersectorally mobile factors have different implications for development (as well as convergence).