A two-country dynamic model of international trade and endogenous growth: multiple balanced growth paths and stability


We formulate a two-country endogenous growth model which explain joint determination of long-run trade patterns and world growth rates. After providing the existence and local stability of the continuum of balanced growth paths, we show that main standard trade propositions hold under some modifications and that, subject to certain conditions concerning social and private rankings of factory intensities between production sectors, the higher is the growth rate, the smaller is the volume of international trade among balanced growth paths in the continuum.

Junko DOI
Kansai University

Kyoto University

Research Institute for Economics and Business Administration
Kobe University
Rokkodai-cho, Nada-ku, Kobe
657-8501 Japan
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