A Dynamic Heckscher-Ohlin Model and Inferior Goods

Eric W. Bond^a, Kazumichi Iwasa^b and Kazuo Nishimura^b*
a Vanderbilt University
^b Kyoto University

Abstract
Under the assumption that a pure consumption good is labor intensive, we examined the properties of a two-country dynamic Heckscher-Ohlin model that allows for preferences to be non-homothetic (Bond et al. (2009)). In this paper, we assume that a pure consumption good is capital intensive and study the properties of the model. 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 and the possibility of inderminacy under free trade as in Bond et al. (2009).

JEL Classifications: E13, E32, F11, F43

Keywords: two-country model, Heckscher-Ohlin, inferior good, multiple equilibria, indeterminacy

A Dynamic International Trade Model with Endogenous Fertility

Yukio Karasawa-Ohtashiro^a* and Akihiko Yanase^b
a Nanzan University
^b Tohoku University

Abstract
This paper examines a two-country dynamic general equilibrium model with endogenous fertility. We show that the introduction of child-rearing behavior brings about new properties in long-run dynamics. After an analysis of the existence, uniqueness, and local stability of the long-run equilibrium, we examine the international trade pattern and comparative statics in order to identify the differences with the standard dynamic international trade model.

JEL Classifications: F43; J11; O41

Keywords: dynamic two-country international trade model; endogenous fertility; long-run trade patterns

Open-Access Renewable Resources as Inputs and International Trade:
A Small Open Economy

Akihiko Yanase^a* and Weijia Dong^b
a Tohoku University
^b Nagoya University

Abstract
This paper develops a small-open-economy model in which two final goods are produced by using a primary factor and a resource good, which has an open-access property and is produced from the primary factor. Under the assumption that only the final goods are tradable, the economy’s patterns of specialization both in the temporary equilibrium and in the steady state are derived. It is shown that in the steady state, the economy either completely specializes in one good or diversifies production, depending on the labor endowment and the growth rate of the resource. The long-run effects of trade on the resource stock and national welfare are also examined.

JEL Classifications: F11, Q27

Revisiting the Optimal Population Size Problem under Endogenous Growth:
Minimal Utility Level and Finite Life

Raouf Boucekkine^a*, Giorgio Fabbrib and Fausto Gozzi^c
a Aix-Marseille University and UC Louvain
^b Università di Napoli
^c Università LUISS Guido Carli

Abstract
In this paper, we devise a social criterion in the spirit of the critical utility level of Blackorby-Donaldson (1984) to study an optimal population size problem in an endogenously growing economy populated by workers living a fixed amount of time and without capital accumulation. Population growth is endogenous. The problem is analytically solved, yielding closed-form solutions to optimal demographic and economic dynamics. It is shown that provided the economy is not driven to optimal finite time extinction, the optimal solution is egalitarian for appropriate choices of the critical utility levels: all individuals of any cohort are given the same consumption. The results obtained do not require any priori restriction of the values of the elasticity of intertemporal substitution unlike in several related papers.

JEL Classifications: D63, D64, C61, 040

Health, Growth and Welfare:
A Theoretical Appraisal of the Long-Run Impact of Medical R&D

Stefano Bosi^a* and Thierry Laurent^b
a University of Cergy-Pontoise
^b University of Evry-Val d’Essonne

Abstract
This paper aims at providing a simple economic framework to address the question of the optimal share of investments in medical R&D in total public spending. In order to capture the long-run impact of tax-financed medical R&D on the growth rate, we develop an endogenous growth model in the spirit of Barro (1990). The model focuses on the optimal sharing of public resources between consumption and (non-health) investment, medical R&D and other health expenditures. It emphasizes the key role played by the public health-related R&D in enhancing economic growth and welfare in the long run.

JEL Classifications: H23, H51, I18, O31

Endogenous Growth and Fluctuations in an Overlapping Generations Economy
with Credit Market Imperfections

Takuma Kunieda^a* and Akihisa Shibata^b
a City University of Hong Kong
^b Kyoto University

Abstract
We study the dynamic properties of growth rates in an overlapping generations economy with credit market imperfections. The analysis demonstrates that in early stages of financial development where credit constraints are severe, growth rates evolve monotonically. At the intermediate level of financial development, as the degree of credit market imperfections diminishes, growth rates exhibit endogenous fluctuations for some parameter values. However, as the financial sector matures, fluctuations disappear and the growth rates evolve once again monotonically.

JEL Classifications: O41

A Two-sector Overlapping Generations Model
with Endogenous Discounting

Carine Nourry^a, Alena Sergeeva^b and Alain Venditti^c*
a Université de la Méditerranée & GREQAM
^b Université de la Méditerranée & DEFI
^c CNRS – GREQAM & EDHEC

Abstract
In this paper, we consider a two-sector two-periods overlapping generations model with inelastic labor, consumption in both periods of life, endogenous discounting and homothetic preferences. We prove that under the assumption of under-accumulation of capital, an economy with endogenous discounting depending on income is much more likely to experience macroeconomic fluctuations compared to an economy with constant discounting.

JEL Classifications: C62, E32, O41