Time preference and two-country trade |
| |
| Authors: | Been-Lon Chen Kazuo Nishimura Koji Shimomura |
| |
| Institution: | Before 31 July 2008: Department of Economics, Washington University, St. Louis, USA. After 1 August 2008: Institute of Economics, Academia Sinica, Taipei, Taiwan. Email:;Kyoto Institute of Economic Research, Kyoto University, Kyoto, Japan.;Research Institute for Economic and Business Administration, Kobe University, Kobe, Japan. |
| |
| Abstract: | We present a dynamic two-country model of international trade with endogenous time preference. We show that if the two countries have similar preferences, production technologies and labor endowments, there exists a unique and stable steady state such that both consumption and investment goods are produced in both countries. Unlike the case of constant time preferences, the steady state is independent of the initial international distribution of capital. We prove a dynamic Heckscher–Ohlin theorem such that the labor-abundant country exports the labor-intensive good. |
| |
| Keywords: | dynamic two-country trade endogenous time preferences Heckscher–Ohlin theorem |
|
|
