Yunfang Hu

HUMAN CAPITAL ACCUMULATION, HOME PRODUCTION AND EQUILIBRIUM DYNAMICS*

In this paper, we construct a three-sector endogenous growth model in which long-run growth is propelled by human capital accumulation. We show that although the addition of a home sector to the standard two-sector endogenous growth model preserves the well-behaved balanced growth equilibrium properties, it generates new transitional dynamics around the balanced growth path. It is shown that, when there is a positive shock to physical capital, our model is more likely to exhibit paradoxical growth than are standard multisector endogenous growth models that exclude home production. Our analysis adds new results to those from the related literature on leisure.

A Factor Endowment Theory of Endogenous Growth and International Trade

This paper presents a dynamic general equilibrium model of multi-country, two-good and two-factor, in which both long-run growth and international trade patterns are examined. In each country, government expenditure on a public intermediate good plays a crucial role in the realization of persistent growth. It is shown that the long-run pattern of international trade is determined in a Heckscher-Ohlin manner.

Dynamic Three-Factor Models of International Trade

Based on the Jones (1971) model, we construct two dynamic models of international trade in which the rate of time preference is either constant or time-varying. The main purpose is to study whether and under what conditions the results derived from the Jones model still hold in the dynamic framework. It is shown that the results of dynamic models may be similar or different to those obtained in the static model. For example, it is possible that, in both static and dynamic models, an increase in a commodity price raises this commoditys output and the rate of return to the specific factor in this sector. However, the effect on the wage rate may be different due to the factor accumulation impact in the dynamic framework.

Capital Accumulation and Structural Change in a Small Open Economy

This paper explores the relation between capital accumulation and transformation of industrial structure in a small open economy. Using a three-sector neoclassical growth model with non-homothetic preferences, we examine the dynamic behaviour of the small country in the alternative trade regimes. We show that capital accumulation plays a leading role in the process of structural transformation. It is also revealed that the trade pattern significantly affects structural change. We demonstrate that our model can mimic a typical pattern of change in industrial structure that has been observed in many developed economies.

Status-Seeking, Catching-Up, and Comparative Statics in a Dynamic Heckscher-Ohlin Model

This paper examines a two-country dynamic general equilibrium model with status-seeking agents. We show that the introduction of status-seeking behavior brings about new properties in equilibrium dynamics. While there exists a continuum of steady states in the standard dynamic models, the present framework demonstrates that, under some conditions, there uniquely exists an incompletely specialized steady state, which is locally saddle-point stable. Therefore, catching-up and overtaking phenomena seen in economic development can be explained, and comparative statics analysis also is made possible. Our comparative statics analysis illustrates, for example, that trade pattern is determined in the Heckscher-Ohlin manner; the patient country acts just like a capital abundant one to export the capital-intensive good. Furthermore, as distinct from the existing literature, the present study shows that the existence of an incompletely specialized steady state can be ensured even if the two countries conduct different policies. Copyright

Endogenous Growth: Fragile Foundations?

The Frankel, Romer and Lucas theories of endogenous growth rest on the assumptions of knowledge-based externalities and price-taking representative agents. It is argued that, in a context of long-run growth, these assumptions are mutually incompatible, that representative agents will cooperate to internalize the externalities and will cease to be price takers, and that, therefore, the relevance of theories based on those assumptions must be questioned.

Multiple equilibria and welfare effects of transfers in a two-country dynamic general equilibrium model

This paper examines the relationship between the dynamic stability of steady state equilibrium and the welfare effects of international transfers in a two-country dynamic Heckscher–Ohlin model. We find that local stability properties of the steady state equilibrium may link closely to the welfare aspect of international transfers. When the two consumption goods exhibit asymmetric properties with respect to income change, multiple steady state equilibria are possible. The usual donor-loss, recipient-benefit result prevails at the saddle-point stable steady state. When a continuum of equilibrium paths exists around one steady state (indeterminacy), transfer paradoxes may occur. Furthermore, we examine the welfare effects of endogenously determined transfers. When international transfers are voluntary unrequited, a positive optimal transfer benefits both the donor and the recipient country. When the optimal transfer is negative, a positive transfer may still benefit the donor country when the world economy starts from an indeterminate steady state.

Chapter 10 Specific Factor Models and Dynamics in International Trade

Based on the Jones (1971) model, we construct two dynamic models of international trade in which the rate of time preference is either constant or time-varying. The main purpose is to study whether and under what conditions the results derived in the Jones model still hold in the dynamic framework. It is shown that the results of dynamic models may be similar or different to those obtained in the static model. For example, it is possible that, in both static and dynamic models, an increase in the commodity price raises this commoditys output and the return to the specific factor in this sector. However, the effects on the wage rate may be different due to the factor accumulation impact in the dynamic framework.

Dynamic Labor Standards Under International Oligopoly

This paper models productive labor standards (LS) in a two-stage, two-period model of international oligopoly, where governments choose subsidies on LS and output first, and oligopolistic firms determine production of LS and output later. We show that the optimal LS production, and the optimal subsidies on LS and output are all positive. While second-period output subsidy is equal to the static one, second-period LS subsidy is higher than the static one. And with inter-temporal LS spillovers, subsidies are more effective on LS than on output. If the home government cares about LS (or human rights) in the foreign country, then it is better not to provide home subsidies, because such subsidies reduce foreign LS. JEL Classification Number: F12, F16, L13