Trade and the Speed of Convergence

초록

Numerous studies on income convergence estimate the convergence equation derived for autarkic economies using data from the world that is increasingly integrated. This paper derives a convergence equation for a world integrated by trade from the standard Heckscher-Ohlin model with factor price equalization. The convergence equation for an integrated world differs from the autarkic one in that (1) the growth rate of each economy is increasing in the global growth rate; (2) the rate of convergence is increasing in the global growth rate; and (3) the rate of convergence, under conventional parameter values, is much lower.

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