International trade and capital accumulation in an overlapping generations model with a public intermediate good. Issue 3 (12th March 2019)

• Record Type: Journal Article
• Authors: Shinozaki, Tsuyoshi; Tawada, Makoto; Yanagihara, Mitsuyoshi
• Is Part Of: Review of international economics. Volume 27:Issue 3(2019)
• Page Start: 765
• Page End: 785
• Publication Date: 2019-03-12
• Subjects: International economic relations -- Periodicals; International finance -- Periodicals; Economic policy -- Periodicals; 330
• DOI: 10.1111/roie.12396
• Languages: English
• ISSNs: 0965-7576

Abstract

Abstract: We investigate the effects of a public intermediate good on trade patterns, capital accumulation, and the gains from trade in a two‐country, three‐sector overlapping generations model. A public intermediate good affects not only the productivity of private production but capital accumulation; thus, the results differ from those obtained in previous studies. First, opening to trade may accelerate capital accumulation in the higher‐savings country. Additionally, the country producing a public intermediate good more (which is labor‐intensive) may be the importer of the investment good (which is the most capital‐intensive). Finally, the lower‐savings country may have lower steady‐state welfare under trade.