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Trade Patterns and Perpetual Youth in a Dynamic Small Open Economy
Title: | Trade Patterns and Perpetual Youth in a Dynamic Small Open Economy |
Authors: | Kanamori, Naoshige1 Browse this author |
Authors(alt): | 金盛, 直茂1 |
Keywords: | Two-Sector Growth Model | Small Open Economy | Perpetual Youth Model |
Issue Date: | 30-Nov-2011 |
Publisher: | Graduate School of Economics and Business Administration, Hokkaido University |
Journal Title: | Economic Journal of Hokkaido University |
Volume: | 40 |
Start Page: | 29 |
End Page: | 40 |
Abstract: | In this paper, I examine the long-run specialization patterns that arise in a small open economy using a two-sector growth model in which households faced with finite but uncertain lifetimes undertake intertemporal optimization decisions. I show that in a small open economy with a positive birth rate, imperfect specialization requires that the subjective discount rate be less than the interest rate. This finding contrasts sharply with Stiglitz's (1970) finding that a country must be completely specialized if the subjective discount rate differs from the interest rate. In addition, I show that a steady state equilibrium with incomplete specialization can be saddle-point stable. |
Type: | bulletin (article) |
URI: | http://hdl.handle.net/2115/47726 |
Appears in Collections: | Economic Journal of Hokkaido University > Vol.40
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