Cost Shifting, Trade Pattern, and Endogenous Growth
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| Title | Cost Shifting, Trade Pattern, and Endogenous Growth
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| Author | Han zhongliang |
| Organization | Beijing Academy of Social Sciences/School of Economics Peking University |
| Email | hanzhongliang@pku.edu.cn |
| Key Words | cost shifting; human capital accumulation; “erosion effect”; trade pattern; endogenous growth |
| Abstract | We construct a model of dynamic trade and endogenous growth based on human capital accumulation. By introducing the cost-shifting factor into the model, we build the cost-shifting growth theory to study the element determining both the trade pattern and growth of developing countries at the same time and its endogenous effect on economic growth. The unique locally saddle-point stable equilibrium can be determined by the dynamic optimization method with the human capital accumulation rate equal to the equilibrium growth rate. The equilibrium demonstrates that cost shifting produces the “creative effect” and “destructive effect”, both of which offset each other. The “destructive effect” may lead to the reduction of human capital accumulation rate and the growth rate in the long run. Therefore, the optimal strategy for developing countries is to control the cost-shifting rate to achieve the long-term growth of human capital accumulation. In the end, we also discuss the conditions for the establishment of H-O theory under the cost-shifting framework. |
| Serial Number | WP894 |
| Time | 2015-07-07 |
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