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Capital Accumulation and Convergence in a Small Open Economy
Author(s) -
Sen Partha
Publication year - 2013
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/roie.12064
Subject(s) - economics , convergence (economics) , consumption (sociology) , capital (architecture) , equalization (audio) , capital accumulation , factor price , econometrics , growth model , microeconomics , macroeconomics , monetary economics , mathematical economics , economy , mathematics , statistics , profit (economics) , history , social science , decoding methods , archaeology , sociology
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 H eckscher– O hlin– S amuelson 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).