Status-seeking, catching-up, and comparative statics in a dynamic heckscher-ohlin model

Yunfang Hu, Koji Shimomura

    Research output: Contribution to journalArticlepeer-review

    4 Citations (Scopus)

    Abstract

    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.

    Original languageEnglish
    Pages (from-to)258-274
    Number of pages17
    JournalReview of Development Economics
    Volume11
    Issue number2
    DOIs
    Publication statusPublished - 2007 May 1

    ASJC Scopus subject areas

    • Geography, Planning and Development
    • Development

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