A dynamic two country Heckscher–Ohlin model with non-homothetic preferences

We examine the properties of a two-country dynamic Heckscher–Ohlin model that allows for preferences to be non-homothetic. We show that the model has a continuum of steady state equilibria under free trade, with the initial conditions determining which equilibrium will be attained. We establish conditions under which a static Heckscher–Ohlin theorem will hold in the steady state, and also conditions for a dynamic Heckscher–Ohlin theorem to hold. If both goods are normal, each country will have a unique autarkic steady state, and all steady state equilibria are saddle points. We also consider the case in which one good is inferior, and show that this can lead to multiple autarkic steady states, violations of the static Heckscher–Ohlin theorem in the steady state. Furthermore, there may exist steady state equilibria that Pareto dominate other steady states. These steady states will be unstable if discount factors are the same in each country, although they may exhibit dynamic indeterminacy if discount factors differ.     

Trade,growth, and convergence in a dynamic Heckscher–Ohlin model

In models in which convergence in income levels across closed countries is driven by faster accumulation of a productive factor in the poorer countries, opening these countries to trade can stop convergence and even cause divergence. We make this point using a dynamic Heckscher–Ohlin model—a combination of a static two-good, two-factor Heckscher–Ohlin trade model and a two-sector growth model—with infinitely lived consumers where international borrowing and lending are not permitted. We obtain two main results: First, countries that differ only in their initial endowments of capital per worker may converge or diverge in income levels over time, depending on the elasticity of substitution between traded goods. Divergence can occur for parameter values that would imply convergence in a world of closed economies and vice versa. Second, factor price equalization in a given period does not imply factor price equalization in future periods.     

The Heckscher–Ohlin model and the network structure of international trade

This paper estimates for 28 product groups a characteristic parameter that reflects the topological structure of its trading network. Using these estimates, it describes how the structure of international trade has evolved during the 1980–2000 period. Thereafter, it demonstrates the importance of networks in international trade by explicitly accounting for their scaling properties when testing the prediction of the “Heckscher–Ohlin” model that factor endowment differentials determine bilateral trade flows. The results suggest that factor endowment differentials increase bilateral trade in goods that are traded in “dispersed” networks. For goods traded in “concentrated” networks, factor endowment differentials are less important.     

Estimating the Heckscher–Ohlin model: Inverting the inverse matrix

This paper estimates the Heckscher–Ohlin model with annual US data from 1949 to 2006 for outputs of manufactures and services with inputs of fixed capital assets and the labor force. Difference equation and error correction regressions provide estimated coefficients for the comparative static system. Tariffs on manufactures primarily raise the capital return in the estimated Stolper–Samuelson results. Factor price equalization does not hold for labor and capital. Inverting the estimated system inverse matrix provides evidence on production. The suggestions are capital biased production of manufactures, strong substitution of capital for labor, and strong labor substitution in manufactures.     

Stochastic accumulation of human capital and welfare in the Uzawa–Lucas model: an analytical characterization

Stochastic growth models are often solved numerically, because they are not tractable in general. However, recent several studies find the closed-form solution to the stochastic Uzawa–Lucas model in which technological progress or population dynamics follow a Brownian motion process with one or two parameter restriction(s). However, they assume that the return on the accumulation of human capital is deterministic, which is inconsistent with empirical evidence. Therefore, I develop the Uzawa–Lucas model in which the accumulation of human capital follows a mixture of a Brownian motion process and many Poisson jump processes, and obtain the closed-form solution. Moreover, I use it to examine the nexus between human capital uncertainty, technological progress, expected growth rate of human capital, and welfare.     

Heckscher–Ohlin theory when countries have different technologies

Rethinking the foundations of Heckscher–Ohlin theory when countries have different technologies, this paper shows how to make the proper adjustments for international productivity differences. The central tool is a factor conversion matrix that computes the local factor content of foreign Rybczynski effects. Factor-specific productivities are a special case of these more general linear relationships.     

Empirical foundations for the resurrection of Heckscher–Ohlin theory

We decompose the factor content of trade into Heckscher–Ohlin–Vanek trade and Ricardian trade. We measure factor content using only the United States' technology and also as Leontief advocated, using the local technology. In either case, differences in endowments are quite important in explaining the factor content of trade. If one uses raw estimated coefficients as a means of comparison, differences in endowments are ten times as important as differences in technology.     

Optimal taxation in the Uzawa–Lucas model with externality in human capital

In this paper we study the optimal policy in the Uzawa–Lucas model with externality in human capital when agents value both consumption and leisure. We find that the government pursuing the first best can achieve its goal by a subsidy which depends on foregone earnings while studying and which is financed through a lump sum tax. Anyway, the optimal policy, that should be designed to provide incentives for agents to devote more time to schooling and cut both on leisure and working, is not unique. There exists an infinite number of combinations of consumption, capital income, labor income and lump sum taxes that can decentralize the first best.     

Are public and private outlays for physical and knowledge capital accumulation equally productive?

Utility firms are subject to peculiar regulatory characteristics that may allow for unique wealth effects resulting from acquisitions. The wealth effects derived from acquisitions of utility firms is measured and the analysis reveals negative wealth effects for acquirers and positive wealth effects for targets. However, the wealth effects are generally less favorable for utility firm acquirers than other acquirer firms because of the regulatory barriers that prevent them from pursuing attractive targets.     

Does human capital or physical capital constrain output in Japanese prefectures?

This paper develops a dynamic–network DEA (data envelopment analysis) model where total output is jointly produced from two sectors: a human capital sector and a physical capital sector. Each prefecture produces a final output and an intermediate product which is used to augment future physical capital. The optimization method allows future production possibilities to be enhanced if some final output in the current period is foregone so that larger amounts of the intermediate product can be produced. The goal is to choose the amounts of final output and intermediate product so as to maximize the size of the production possibility set. The method also allows identification of whether output is constrained by a lack of physical capital, a lack of human capital or a lack of both types of capital. We apply our method to 47 Japanese prefectures during the period 2007–2009. A key finding is that a lack of human capital is constraining potential output.     

Granger causality tests among openness to international trade,human capital accumulation and economic growth in China: 1952–1999

Abstract

This study examines Granger causality among openness to international trade, human capital accumulation and economic growth in China using time series data over the period from 1952 to 1999 and a sub-period, i.e. a period from 1978 to 1999. For the 1952–1999 period, economic growth is found to Granger cause human capital accumulation and not vice versa. For the 1978–1999 period, economic growth and openness to international trade, economic growth and human capital accumulation, and human capital accumulation and openness to international trade are found to have bidirectional Granger causality, respectively. Thus, there is a dynamic relationship among openness to international trade, human capital accumulation and economic growth. The experience of economic reform in China could be an example to other developing countries.     

Regional distribution and dynamics of human capital in China 1985–2014

This study investigates the regional distribution and dynamics of human capital in China. We develop a new comprehensive human capital measure based on the Jorgenson-Fraumeni (J-F) lifetime income framework, in addition to using the traditional education-based human capital measures. We find that the new J-F human capital measure reflects more closely the regional economic disparity than the education-based measures. We also conduct a Divisia decomposition analysis to investigate the contributions of different factors to the quantity and quality growth of human capital and to regional disparity. Our results show that the regional human capital gaps in China are enlarging in general. Education and urbanization contribute most to human capital growth, while population aging shows a strong negative effect. Our estimates create a new provincial level human capital panel dataset from 1985 to 2014, which is useful for empirical work and policy analysis.     

How important are human capital, physical capital and total factor productivity for determining state economic growth in the United States, 1840–2000?

This paper introduces new data on state-level physical capital by sector and land in the farm sector for the states of the United States from 1840 to 2000. These data are incorporated into aggregate accounting exercises with the aim of comparing cross-state results to those found in cross-country samples. Our aggregate results agree closely with the cross-country literature: input accumulation accounts for most of output growth, between three-fifths and three-quarters, but variation in the growth of TFP accounts for about three-quarters of the variation in the growth rate of output per worker. In convergence accounting, convergence of log TFP accounts for about seventy percent of the observed convergence in log output per worker.     

Interest rates,distribution and capital accumulation – A post-Kaleckian perspective on the US and Germany

We analyse the effects of interest rate variations on the rates of capacity utilisation, capital accumulation and profit in a simple post-Kaleckian distribution and growth model. This model gives rise to different potential accumulation regimes depending on the values of the parameters in the investment, saving and distribution function. Estimating these core behavioural equations for the US and Germany in the period 1960–2007, we find significant and robust effects of interest payments with the expected sign in each of the equations. Our estimation results imply, both for the US and for Germany, that the effects of changes in the real long-term rate of interest on the equilibrium rates of capacity utilisation, capital accumulation and profits, are characterised by the ‘normal regime’: rising long-term real rates of interest cause falling rates of capacity utilisation, capital accumulation and profits, as well as redistribution at the expense of labour income and hence an increasing profit share in both countries.     

A story of large landowners and math skills: Inequality and human capital formation in long-run development, 1820–2000

We create a new dataset to test the influence of land inequality on long-run human capital formation in a global cross-country study and assess the importance of land inequality relative to income inequality. Our results show that early land inequality has a detrimental influence on math and science skills even a century later. We find that this influence is causal, using an instrumental variable (IV) approach with geological, climatic and other variables that are intrinsically exogenous. A second major contribution of our study is our assessment of the persistence of numerical cognitive skills, which are an important component of modern human capital measures. Early numeracy around 1820 is estimated using the age-heaping strategy. We argue that countries with early investments in numerical education entered a path-dependency of human capital-intensive industries, including skill-intensive agriculture and services. The combined long-run effects of land inequality and human capital path-dependence are assessed for the first time in this article.     

A dynamic analysis of the Korea–Japan free trade area: simulations with the G‐cubed Asia–Pacific model

This paper explores the effects of the proposed free trade agreement between Japan and Korea. Our experiments are based on a new dynamic simulation model, called the Asia‐Pacific G‐cubed Model, which incorporates the rational expectations and intertemporal optimizing behaviour of agents. The simulations show that both Korea and Japan benefit from the bilateral FTA although other countries lose. The output gains from the FTA are estimated to be larger when trade liberalization is undertaken by a tariff reduction that is more gradually phased‐in than rapid.

JEL Classification: F15     

Pursuing the wrong options? Adjustment costs and the relationship between uncertainty and capital accumulation

Abel and Eberly (1999) prove that uncertainty has an ambiguous effect on long run capital accumulation in a real options model. We show that, with adjustment costs quadratic in investment, more uncertainty reduces capital and this effect may be large.     

A grey dynamic model for the evaluation of regional sustainable development and its empirical study

Currently, traditional development issues, such as economic stagnation, as well as new challenges like environmental degradation and globalization, need attention. Sustainable development, including economic, environmental, and social elements, is a main goal of decision-makers. The key to sustainable decision-making is to evaluate and forecast the status quo of sustainable development. Policy makers need a tool based on scientific information to forecast the effects of future actions on sustainability and make policies for sustainable development. This paper analyzes the relation of the economy, environment and social welfare by the grey dynamic model. The proposed method uses time series and basic indicators of ecological system, including economic, environmental and social sub-systems. It is applied to Heilongjiang Province and Jiangsu Province. The results have proved different status quo of sustainable development in these two regions, and suggestions are proposed, such as optimization of industrial structure and eco-industrial development. The conclusion is that there is no unique sustainable path, and accordingly, policy makers should choose different criteria and strategies to make efficient sustainable decisions for each region.