Capital accumulation and international trade |
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| Institution: | 1. University of California, Berkeley, CA 94720-3880, USA;2. Columbia University, 420 W. 118 St. MC 3308, New York 10027, NY, USA;3. National Bureau of Economic Research, 1050 Massachusetts Avenue, Cambridge, MA 02138-5398, USA;1. Columbia University, USA;2. University of Maryland, USA;3. Department of Economics, Columbia University, 420 W. 118th Street, New York, NY 10027, 212-854-1094, USA;1. University of Minnesota, 4-171 Hanson Hall 1925 Fourth Street South,Minneapolis, MN 55455, United States;2. University of Oregon, 1285 University of Oregon, Eugene, OR 97403, United States;3. University of Chicago, 5757 S University of Chicago, IL 60637, United States;4. New York University, 19 West 4th Street, New York, NY 10003, United States;1. University of Chicago, NBER, 1126 East 59th Street, Chicago, IL 60637, USA;2. EIEF and University of Sassari, Via Sallustiana 62, Rome, Italy |
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| Abstract: | Capital accumulation is introduced into a version of Eaton–Kortum model of international trade, imposing period by period balanced trade. The effects of tariff changes on world steady states and transition dynamics are studied. A calibrated version of the model is used to assess the short- and long-run gains from a world-wide elimination of trade tariffs. The determinants and importance of convergence in world-wide capital as well as convergence on the relative capitals and incomes are analyzed. Positive and normative comparisons with an analogous static model are conducted, as well as comparisons steady state welfare comparisons vs full dynamic gains. |
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