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On Terms of Trade and Capital Accumulation
Author(s) -
Guilló María Dolores
Publication year - 1999
Publication title -
review of international economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.513
H-Index - 58
eISSN - 1467-9396
pISSN - 0965-7576
DOI - 10.1111/1467-9396.00159
Subject(s) - economics , capital (architecture) , general equilibrium theory , stock (firearms) , investment (military) , production (economics) , capital intensity , overlapping generations model , capital accumulation , factors of production , monetary economics , sector model , terms of trade , international economics , macroeconomics , microeconomics , mechanical engineering , history , profit (economics) , agriculture , ecology , archaeology , politics , biology , political science , law , engineering
This paper studies, within an OLG general equilibrium framework, the role of relative factor intensities in determining the relationship between the terms of trade and the capital stock. It shows that a diversified production equilibrium can be characterized by a positive association between these two variables if the investment sector is more labor‐intensive and sector technologies are relatively dissimilar. Therefore, capital accumulation and terms‐of‐trade improvements do not require an import sector growing faster than the export sector when the latter is more capital‐intensive. Large Stolper–Samuelson effects on factor incomes drive the results.