Wealth Accumulation and Growth in a Specific-Factors Model of Trade and Finance

Petrucci, Alberto (2006) Wealth Accumulation and Growth in a Specific-Factors Model of Trade and Finance. [Discussion Paper]. SEGeS. p. 33.

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Abstract/Index

This paper investigates the allocative properties of an OLG specificfactors small open economy facing perfect capital mobility. Wealth formation, economic development and different labor market regimes are at the center-stage of the analysis. In a model with competitive wages and no unemployment, we find that exogenous shocks that do not affect human wealth —like the terms of trade and land endowment shifts— or the propensity to save, leave nonhuman wealth, consumption and aggregate labor unchanged; in such cases, capital formation is driven by the static effects exerted on sectoral labor. Disturbances that alter human wealth —like the world interest rate, and capital and labor taxation shocks— or the thrift rate, instead, affect nonhuman wealth and consumption as they involve an intergenerational redistribution of resources that modifies aggregate saving; labor hours supplied may be changed. In these circumstances, capital accumulation is the result of the consequences exerted on financial wealth and input demands. The consideration of a labor market with structural unemployment does not qualitatively affect the results, except for the world interest rate and the rate of time discount shifts. Our results differ substantially from those obtained in static and dynamic specific-factors setups with financial autharky.


Item Type:Report / Paper (Discussion Paper)
Research documents and activity classification:Working Papers > Non-Refereed Working Papers / of national relevance only
Divisions:Department of Business and Management
Uncontrolled Keywords:Specific-Factors. Capital Accumulation. Land. Net Foreign Assets. Finite Horizons.
MIUR Scientific Area:Area 13 - Economics and Statistics > SECS-P/01 Political Economy
Deposited By:Silvia Capobianchi
Deposited On:03 Jul 2009 10:55
Last Modified:08 Feb 2013 21:12

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