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Journal ArticleDOI

Gains from trade with overlapping generations

01 Jun 1995-Economic Theory (Springer Science and Business Media LLC)-Vol. 6, Iss: 2, pp 283-303
TL;DR: This paper examined the welfare effects of international trade in a context of overlapping generations and showed that uncompensated free trade may be Pareto inferior to autarky for a single trading country, but for a small open economy the terms of trade improve or the number of tradable goods increases, or when a customs union is formed.
Abstract: This paper examines the welfare effects of international trade in a context of overlapping generations. It shows that, for a single trading country, uncompensated free trade may be Pareto inferior to autarky. However, for each government there are compensation schemes which guarantee welfare improvements for all local individuals when free trade is allowed, or when for a small open economy the terms of trade improve or the number of tradable goods increases, or when a customs union is formed.
Citations
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Journal ArticleDOI
TL;DR: In this paper, a two-country, two-good, twofactor, two period-lived overlapping generations model is proposed to examine how population aging determines the pattern of and gains from trade.

38 citations

ReportDOI
TL;DR: In this article, the authors compare the properties of dynamic Heckscher-Ohlin models with overlapping generations with those of models with infinitely-lived consumers, and show that the latter is more stable than the former.
Abstract: This paper contrasts the properties of dynamic Heckscher-Ohlin models with overlapping generations with those of models with infinitely lived consumers. In both environments, if capital is mobile across countries, factor price equalization occurs after the initial period. In general, however, the properties of equilibria differ drastically across environments: With infinitely lived consumers, we find that factor prices equalize in any steady state or cycle and that, in general, there is positive trade in any steady state or cycle. With overlapping generations, in contrast, we construct examples with steady states and cycles in which factor prices are not equalized, and we find that any equilibrium that converges to a steady state or cycle with factor price equalization has no trade after a finite number of periods.

32 citations


Cites background or methods from "Gains from trade with overlapping g..."

  • ...Papers that study the two-sector overlapping generations environment under the small open economy assumption include Serra (1991), Gokcekus and Tower (1998), Kemp and Wong (1995), and Fisher (1992)....

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  • ...The literature on dynamic Heckscher-Ohlin models was pioneered by Oniki and Uzawa (1965), Bardhan (1965), Stiglitz (1970), and Deardorff and Hanson (1978)....

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Journal ArticleDOI
Laura Alfaro1
TL;DR: In this article, the authors examine the economic consequences of political conflicts that arise when countries implement capital controls in an overlapping-generations model, where agents vote on whether to open or close an economy to capital flows.
Abstract: The paper examines the economic consequences of political conflicts that arise when countries implement capital controls. In an overlapping-generations model, agents vote on whether to open or close an economy to capital flows. The young (workers) receive income only from wages while the old (capitalists) receive income only from savings. The authors characterize the set of stationary equilibria for an infinite-horizon game. Assuming dynamic efficiency, when the median representative is a worker (capitalist), capitalimporting countries will open (close) while capital-exporting countries will close (open). These predicted patterns are consistent with data on liberalization policies over time and across various countries.

31 citations

Journal ArticleDOI
TL;DR: The authors examined the effects of different aging speeds on international trade patterns in an open overlapping generations model and showed that an expansion in life expectancy of a country does not necessarily make the country a net exporter of capital-intensive goods when fertility is endogenous, depending on the relative magnitudes of the positive Rybczynski effect of changes in the factor endowments and the negative effect from the consumption-savings choice.
Abstract: We examine the effects of different aging speeds on international trade patterns in an open overlapping generations model. An expansion in life expectancy of a country does not necessarily make the country a net exporter of capital-intensive goods when fertility is endogenous, depending on the relative magnitudes of the positive Rybczynski effect of changes in the factor endowments and the negative effect from the consumption–savings choice on the relative price in the autarkic steady state. The incidence of gains from trade among generations after opening trade depends on whether the country becomes a net exporter or importer of capital-intensive goods.

23 citations


Cites methods from "Gains from trade with overlapping g..."

  • ...22 In a way similar to Naito and Zhao (2009), we may examine compensated policies of the Kemp and Wong (1995) type....

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Posted Content
TL;DR: In this article, the authors consider a two-country world where the population in one country grows faster than the other, and investigate the implications of the addition of non-stationary population dynamics to a simple 2- commodity, 2-factor model of international trade within an overlapping- generations framework.
Abstract: This paper considers a two-country world where the population in one country grows faster than the other, and investigates the implications of the addition of non-stationary population dynamics to a simple 2- commodity, 2-factor model of international trade within an overlapping- generations framework. The two countries in the world considered are assumed to be identical in every respect except, for their population growth rates initially. The effects of differential speed of population growth on relative factor endowments and patterns of international trade are explored by comparing simulation results obtained from the overlapping-generations general equilibrium model under autarky and trade scenarios. Unequal population growth rates are shown to give rise to differentials in wage rates and rentals for capital under autarky conditions. This, in turn, causes costs of production and relative prices to differ, creating the grounds for trade in the sense of Heckscher-Ohlin (HO). Yet, the results from simulation exercises indicate that static welfare results from the standard 2x2x2 HO model can not be generalized to hold in a dynamic setting with overlapping generations of individuals.

12 citations


Cites background from "Gains from trade with overlapping g..."

  • ...Some studies using OLG models, such as Kemp and Wong (1995) and Roy and Rassouli (1991), argue that the absence of these mechanisms may result in free trade being inferior to autarky....

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References
More filters
Journal ArticleDOI
TL;DR: This article developed the equilibrium conditions for a rational consumer's lifetime consumption-saving pattern, a problem more recently given by Harrod the useful name of "hump saving" but which Landry, Bbhm-Bawerk, Fisher, and others had touched on long before my time.
Abstract: M Y FIRST published paper' has come of age, and at a time when the subjects it dealt with have come back into fashion. It developed the equilibrium conditions for a rational consumer's lifetime consumption-saving pattern, a problem more recently given by Harrod the useful name of "hump saving" but which Landry, Bbhm-Bawerk, Fisher, and others had touched on long before my time.2 It dealt only with a single individual and did not discuss the mutual determination by all individuals of the

3,399 citations

Book
01 Jan 1980
TL;DR: In this article, the authors expound trade theory emphasizing that a trading equilibrium is general rather than partial, and is often best modelled using dual or envelope functions, and give unified treatments of comparative statics and welfare, sheds new light on the factor-price equalization issue, and treats the modern specific-factor model in parallel with the usual Heckscher-Ohlin one.
Abstract: This book expounds trade theory emphasizing that a trading equilibrium is general rather than partial, and is often best modelled using dual or envelope functions. This yields a compact treatment of standard theory, clarifies some errors and confusions, and produces some new departures. In particular, the book (i) gives unified treatments of comparative statics and welfare, (ii) sheds new light on the factor-price equalization issue, (iii) treats the modern specific-factor model in parallel with the usual Heckscher-Ohlin one, (iv) analyses the balance of payments in general equilibrium with flexible and fixed prices, (v) studies imperfect competition and intra-industry trade.

1,233 citations

MonographDOI
30 Sep 1980
TL;DR: In this article, the authors expound trade theory emphasizing that a trading equilibrium is general rather than partial, and is often best modelled using dual or envelope functions, and give unified treatments of comparative statics and welfare, sheds new light on the factor-price equalization issue, and treats the modern specific-factor model in parallel with the usual Heckscher-Ohlin one.
Abstract: This book expounds trade theory emphasizing that a trading equilibrium is general rather than partial, and is often best modelled using dual or envelope functions. This yields a compact treatment of standard theory, clarifies some errors and confusions, and produces some new departures. In particular, the book (i) gives unified treatments of comparative statics and welfare, (ii) sheds new light on the factor-price equalization issue, (iii) treats the modern specific-factor model in parallel with the usual Heckscher-Ohlin one, (iv) analyses the balance of payments in general equilibrium with flexible and fixed prices, (v) studies imperfect competition and intra-industry trade.

823 citations

Posted Content
01 Jan 1985
TL;DR: In this article, the authors expound trade theory emphasizing that a trading equilibrium is general rather than partial, and is often best modelled using dual or envelope functions, and give unified treatments of comparative statics and welfare, sheds new light on the factor-price equalization issue, and treats the modern specific-factor model in parallel with the usual Heckscher-Ohlin one.
Abstract: This book expounds trade theory emphasizing that a trading equilibrium is general rather than partial, and is often best modelled using dual or envelope functions. This yields a compact treatment of standard theory, clarifies some errors and confusions, and produces some new departures. In particular, the book (i) gives unified treatments of comparative statics and welfare, (ii) sheds new light on the factor-price equalization issue, (iii) treats the modern specific-factor model in parallel with the usual Heckscher-Ohlin one, (iv) analyses the balance of payments in general equilibrium with flexible and fixed prices, (v) studies imperfect competition and intra-industry trade.

381 citations