July  2019, 6(3): 179-194. doi: 10.3934/jdg.2019013

Free mobility of capital and Labor force in a two-country model: The dynamic game for growth

1. 

Facultad de Economía UASLP, Av. Pintores S7N, San Luis Potosí, CP 78280, México

2. 

DESP University of Urbino Carlo Bo, Italy and Research member at UAdeC, México

3. 

Ministry of Economy and Finance, Italy

4. 

School of Public Administration, Universiry of Gothemburg, Sweden

* Corresponding author: Elvio Accinelli

Received  December 2018 Published  April 2019

Fund Project: The authors would like to thank Alejandro Neme as well as an anonymous referee for their useful comments and suggestions to improve this work. Opinions expressed in this publication are those of the authors and do not necessarily reflect the official opinion of the Italian Ministry of Economy and Finance.

In this paper, we consider a two-country and two-sector economy, where firms can choose to be innovative or not innovative, and workers to be skilled or unskilled. Using a dynamic game, we argue that exploiting the comparative advantages a country has in producing goods that use the most abundant factor of production, free mobility of capital and labor is beneficial for economic growth. However, if a country has a comparative advantage in a sector that uses intensely unskilled labor (which is the case of several underdeveloped economies), a poverty trap may arise. For this reason we argue that national Governments must ensure the technological development to improve competitiveness and therefore a social optimal use of the comparative advantages.

Citation: Elvio Accinelli, Edgar Sánchez Carrera, Laura Policardo, Osvaldo Salas. Free mobility of capital and Labor force in a two-country model: The dynamic game for growth. Journal of Dynamics & Games, 2019, 6 (3) : 179-194. doi: 10.3934/jdg.2019013
References:
[1]

E. AccinelliB. BazzanoF. Robledo and P. Romero, Nash Equilibrium in Evolutionary Competitive Models of Firms and workers, Journal of Dynamics and Games., 2 (2015), 1-32.  doi: 10.3934/jdg.2015.2.1.  Google Scholar

[2]

E. Accinelli and E. Sánchez Carrera, Strategic complementarities between innovative firms and skilled workers: The poverty trap and the policymaker's intervention, Structural Change Economic Dynamics, 22 (2011), 30-40.   Google Scholar

[3]

E. AccinelliJ. G. Brida and E. Sánchez Carrera, Imitative behavior in a two-population model in advances in dynamic games, Annals of the International Society of Dynamic Games, (2010).   Google Scholar

[4]

T. Agémon, Who gets what: The MNE, the national state and the distributional effects of globalization, Journal of International Business Studies, 34 (2003), 416-427.   Google Scholar

[5]

H. Fofack, Technology Trap And Poverty Trap In Sub-Saharan Africa, Policy Research Working Papers, 2008. Google Scholar

[6]

R. Gibbons and L. Katz, Does unmeasured ability explain inter-industry wage differentials, The Review of Economic Studies, 59 (1992), 515-535.   Google Scholar

[7]

J. R. Harris and M. P. Todaro, (1970), Migration, unemployment and development: A two-sector analysis, The American Economic Review, 60 (1992), 126-142.   Google Scholar

[8]

A. S. Herbert, A behavioral model of rational choice, The Quarterly Journal of Economics, 69 (1955), 99-118.   Google Scholar

[9]

A. B. Krueger and L. H. Summers, Efficiency wages and the inter-industry wage structure, Econometrica, 56 (1988), 259-293.   Google Scholar

[10]

K. A. Lawler and H. Seddighi, International Economics: Theories, Themes, and Debates, Pearson Education, 2001. Google Scholar

[11] B. Ohlin, Interregional and International Trade, Harvard University press, 1933.   Google Scholar
[12]

D. Ricardo, On the Principles of Political Economy and Taxation (1 ed.), London: John Murray, 1817. Google Scholar

[13]

A. Smith, An Inquiry into the Nature and Causes of the Wealth of Nations. 1 (1 ed.), London: W. Strahan, 1776, Retrieved 2012-12-07, volume 2. Google Scholar

[14]

Y.-C. Wang and P. Wang, Barriers to Health and the Poverty Trap, NBER Working paper, 2013. Google Scholar

show all references

References:
[1]

E. AccinelliB. BazzanoF. Robledo and P. Romero, Nash Equilibrium in Evolutionary Competitive Models of Firms and workers, Journal of Dynamics and Games., 2 (2015), 1-32.  doi: 10.3934/jdg.2015.2.1.  Google Scholar

[2]

E. Accinelli and E. Sánchez Carrera, Strategic complementarities between innovative firms and skilled workers: The poverty trap and the policymaker's intervention, Structural Change Economic Dynamics, 22 (2011), 30-40.   Google Scholar

[3]

E. AccinelliJ. G. Brida and E. Sánchez Carrera, Imitative behavior in a two-population model in advances in dynamic games, Annals of the International Society of Dynamic Games, (2010).   Google Scholar

[4]

T. Agémon, Who gets what: The MNE, the national state and the distributional effects of globalization, Journal of International Business Studies, 34 (2003), 416-427.   Google Scholar

[5]

H. Fofack, Technology Trap And Poverty Trap In Sub-Saharan Africa, Policy Research Working Papers, 2008. Google Scholar

[6]

R. Gibbons and L. Katz, Does unmeasured ability explain inter-industry wage differentials, The Review of Economic Studies, 59 (1992), 515-535.   Google Scholar

[7]

J. R. Harris and M. P. Todaro, (1970), Migration, unemployment and development: A two-sector analysis, The American Economic Review, 60 (1992), 126-142.   Google Scholar

[8]

A. S. Herbert, A behavioral model of rational choice, The Quarterly Journal of Economics, 69 (1955), 99-118.   Google Scholar

[9]

A. B. Krueger and L. H. Summers, Efficiency wages and the inter-industry wage structure, Econometrica, 56 (1988), 259-293.   Google Scholar

[10]

K. A. Lawler and H. Seddighi, International Economics: Theories, Themes, and Debates, Pearson Education, 2001. Google Scholar

[11] B. Ohlin, Interregional and International Trade, Harvard University press, 1933.   Google Scholar
[12]

D. Ricardo, On the Principles of Political Economy and Taxation (1 ed.), London: John Murray, 1817. Google Scholar

[13]

A. Smith, An Inquiry into the Nature and Causes of the Wealth of Nations. 1 (1 ed.), London: W. Strahan, 1776, Retrieved 2012-12-07, volume 2. Google Scholar

[14]

Y.-C. Wang and P. Wang, Barriers to Health and the Poverty Trap, NBER Working paper, 2013. Google Scholar

Figure 1.  Two countries each one with two specialized industries
Figure 2.  A country in poverty trap
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