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Trade and the Speed of Convergence
Author(s) -
Song E. Young
Publication year - 2014
Publication title -
review of development economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.531
H-Index - 50
eISSN - 1467-9361
pISSN - 1363-6669
DOI - 10.1111/rode.12065
Subject(s) - convergence (economics) , economics , rate of convergence , growth rate , convergence tests , econometrics , macroeconomics , mathematics , computer science , key (lock) , geometry , computer security
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 H eckscher– O hlin 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.