Economic Convergence and Economic Policies

Sachs, Jeffrey D.; Warner, Andrew M.

doi:10.3386/w5039

Cited by 161 publications

(50 citation statements)

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“…It is assumed that income levels spread from high density towards lower density levels. This happens as a result of economic integration or openness in the sense of Sachs and Warner [28,29]. The more open grow, the less open decline, but in any case there is a spreading away from the initial income 3 .…”

Section: The Modelmentioning

confidence: 99%

“…3 Sachs and Warner report a strong convergence in per capita GDP amongst the group of countries classified as open, but no convergence amongst the closed economies. The average growth premium for opening an economy is estimated not to be insignificant-2.5 percentage points on annual growth [26][27][28][29]. 4 As empirically illustrated by Lucas and others, the early leaders in industrialization like the United Kingdom and the Netherlands, needed over 50 years for income to double from $2000 to $4000.…”

Section: The Modelmentioning

confidence: 99%

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On a Theme by Heckscher-Ohlin: A Diffusion Model for Spatial Dynamics in Factor Prices

Hashemi¹

2012

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An analytical study is presented for the cross-sectional distribution of factor prices over time and across space. A drift-diffusion model is proposed to describe the dynamic process governing the fluctuations around the equilibrium distribution. The model is mechanical and descriptive in nature, and illustrates that the growth distribution of factor prices can be generated by a single stochastic process that builds upon the theory of diffusion processes. An empirical application of the proposed model, to the evolution of the distribution of incomes for 186 countries, recorded from 1993 up to 2007, illustrates the applicability of the proposed method and suggests that diffusion may be a preferable technique for the analysis of the spatial dynamics in factor prices.Keywords: International Trade; Factor Price Equalization; Cross-Sectional Distribution of Factor Price; Diffusion Full AbstractThis paper presents an analytical study of the cross-sectional distribution of factor prices over time and across space. A methodology is proposed, which offers a novel representation for the Heckscher-Ohlin model and its key implications, including the Factor price equalization, the Stolper-Samuelson and the Rybczynski theorems. A driftdiffusion model is proposed to describe the dynamic process governing the fluctuations around the equilibrium distribution of factor price. The model is mechanical and descriptive in nature, and illustrates that the growth distribution of factor price can be generated by a single stochastic process that builds upon the theory of diffusion processes.The dynamics of the proposed model rely on two opposing flows: 1) a factor equalization process which is meant to concentrate the distribution, and 2) a counteracting diffusion process which is meant to describe noise thus flattening the distribution. One of the parameters entering into diffusion is motivated by random shocks. It is hypothesized that these flows follow simple evolutionary laws that can be described with five parametersparameters that can be estimated from historical data with some accuracy.An empirical application of the proposed model, to the evolution of the distribution of incomes for 186 countries, recorded from 1993 up to 2007, illustrates the applicability of the proposed method for studying income distribution dynamics, and suggests that diffusion may be a preferable technique for the analysis of spatial dynamics in factor prices.The question posed by this paper is an original one. While much attention has been given in the literature to the explanation of the shape of income distribution at a given point in time by reference to steady state arguments [1][2][3][4], the dynamics in question have been relatively ignored. The main objective of this paper is to contribute to our understanding of some determinants of the dynamic process governing the distribution of income, and build up a tractable structure for its analysis. This is achieved by deriving both the steady state distribution as well as the dynamic behavior of t...

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Section: The Modelmentioning

confidence: 99%

Section: The Modelmentioning

confidence: 99%

On a Theme by Heckscher-Ohlin: A Diffusion Model for Spatial Dynamics in Factor Prices

Hashemi¹

2012

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“…Market-seeking FDI might lead to higher employment, but less trade, 116 while efficiency-seeking FDI might lead to both more employment and more trade. 117 In general, economists seem to agree that manufacturing industries are more wealth-creating than commodities or service industries. 118 Therefore, it is argued that FDI related to manufacturing will have a bigger impact on economic growth than extractive-sector FDI.…”

Section: Investor State Dispute Settlementmentioning

confidence: 99%

“…117 In general, economists seem to agree that manufacturing industries are more wealth-creating than commodities or service industries. 118 Therefore, it is argued that FDI related to manufacturing will have a bigger impact on economic growth than extractive-sector FDI. 119 Research done on economic growth in China seems to underscore this point.…”

Section: Investor State Dispute Settlementmentioning

confidence: 99%

“…118 Therefore, it is argued that FDI related to manufacturing will have a bigger impact on economic growth than extractive-sector FDI. 119 Research done on economic growth in China seems to underscore this point. 120 By the same token, Laura Alfaro has come to the conclusion that FDI in the primary sector tends to have a negative effect on growth but investment in manufacturing has a positive one, while evidence from the service sector is ambiguous.…”

Section: Investor State Dispute Settlementmentioning

confidence: 99%

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Certain Controversial Issues of EU-US Trade Negotiations Leading to the Signing of the Transatlantic Trade and Investment Partnership (TTIP)

Martinić

Maljak

2014

CYELP

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Exports, domestic policy and world markets: a panel study

Love

Turner

2001

J of Intl Development

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This paper analyses how export growth rates in sub-Saharan Africa are determined by both domestic and external market conditions. We highlight the problems of measuring trade orientation given the various domestically-determined factors which influence the conditions faced by exporters. Focusing on the impact of trade policy is not a good measure of trade orientation since additional domestic policies can have an important influence on the trade orientation of a country. Hence, we select an index which incorporates the effect of trade and other policies. Then we construct an index which provides a more appropriate measure of conditions faced by exporters in the world market than previously cited measures. We find that, contrary to the recent literature, external market conditions are still critical in explaining export growth rates in sub-Saharan Africa and should be taken into account when engaging in policy decisions. Copyright © 2001 John Wiley & Sons, Ltd.

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Economic Convergence and Economic Policies

Cited by 161 publications

References 10 publications

On a Theme by Heckscher-Ohlin: A Diffusion Model for Spatial Dynamics in Factor Prices

On a Theme by Heckscher-Ohlin: A Diffusion Model for Spatial Dynamics in Factor Prices

Certain Controversial Issues of EU-US Trade Negotiations Leading to the Signing of the Transatlantic Trade and Investment Partnership (TTIP)

Exports, domestic policy and world markets: a panel study

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