Open AccessRich and Poor Countries in Neoclassical Trade and Growth
Author(s) -
Deardorff Alan V.
Publication year - 2001
Publication title -
the economic journal
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 4.683
H-Index - 160
eISSN - 1468-0297
pISSN - 0013-0133
DOI - 10.1111/1468-0297.00608
Subject(s) - economics , diversification (marketing strategy) , convergence (economics) , club , homogeneous , growth model , poverty , capital (architecture) , developing country , international economics , macroeconomics , economic growth , medicine , history , physics , archaeology , anatomy , marketing , business , thermodynamics
A neoclassical growth model provides an explanation for a ‘poverty trap’, ‘club convergence’, or ‘twin peaks’, in terms of specialisation and international trade. The model has many countries with identical linearly homogeneous technologies for producing three goods using capital and labour. With diverse initial endowments, initial equilibrium has unequal factor prices and two diversification cones. With savings out of wages, following Galor (1996), there may easily be multiple steady states. Poor countries converge to a low steady state while rich countries converge to a high one, even though all share identical technological and behavioural parameters.