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Seoul Journal of Economics - Vol. 18 , No. 2
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Seoul Journal of Economics - Vol. 18, No. 2, pp. 173-203
Abbreviation: SJE
ISSN: 1225-0279 (Print)
Print publication date 31 May 2005
Received 17 Mar 2005 Revised 10 May 2005

Long-Run Comparative Advantage and Transitional Dynamics after Free Trade in an Endogenous Growth Model
Noh-Sun Kwark
Associate Professor, Department of Economics, Sogang University, 1 Shinsoo-dong, Mapo-gu, Seoul 121-742, Korea, Tel: +82-2-705-8770, Fax: +82-2-704-8599 (kwark@sogang.ac.kr)

JEL Classification: F43, F40, O10

Abstract

This paper examines the determinants of long-run comparative advantage and analyzes transitional dynamics after free trade in an endogenous growth model. It shows that a country with favorable conditions for capital accumulation has a long-run comparative advantage in capital-intensive goods. Transitional dynamics shows that the growth rate of a more patient country tends to be higher while a less patient country experiences a slowdown in its output growth rate during the transition path. In this study, it is shown that an endogenous growth model with international trade can produce the three empirically observed facts in the rapidly growing East Asian countries: high savings rates, high growth rates, and a significant change in the trade pattern.

Keywords: Long-run comparative advantage, Endogenous growth, Transitional dynamics, Capital accumulation
Acknowledgments

I am grateful to Marianne Baxter, Mark Bils, Yongsung Chang, Joao Gomez, Insoo Kang, Sergio Rebelo, Changyong Rhee, Alan Stockman, Farshid Vahid, and two anonymous referees for helpful comments and suggestions. All remaining errors are of course mine.

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