Publication
Dec 2008
This paper shows how the steady state capital labor ratio endogenously adjusts to technology shocks in a two-sector small open economy. The authors explains that this effect has largely been neglected in trade theory literature, and this has led to biased predictions of changes in sectoral production and trade. Imposing stylized facts of growth as restrictions, the paper assesses the relative size of the implied prediction bias that appears to matter for empirical studies of trade.
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English (PDF, 16 pages, 243 KB) |
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Author | Erich Gundlach, Albert de Vaal |
Series | Kiel Institute Working Papers |
Issue | 1471 |
Publisher | Kiel Institute for the World Economy |
Copyright | © 2008 Kiel Institute for the World Economy |