Time Preference and Income Convergence in a Dynamic Heckscher-Ohlin Model

著者
Taketo Kawagishi and Kazuo Mino
シリーズ
MQ Discussion Series
DP番号
2013-012
公開年月
November, 2013
言語
英語
URL
ファイル
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Summary

This paper shows that income convergence in an open-economy setting hinges upon how the time-discount rate of the households is determined. As opposed to the case of constant time-discount rate where cross-country income divergence may emerge, the small-open economy may catch up with the rest of the world if the discount rate increases with consumption. In contrast, either if the discount rate decreases with consumption or if future-oriented investment of the household lowers the time-discount rate, then the small-open economy fails to catch up with the rest of the world under free trade of commodities.

 
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