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Two countries each one with two specialized industries
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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 |
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.
Mathematics Subject Classification:
C70, C73, F12, F16, F20, F42, O30.
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
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References:
| [1] |
E. Accinelli, B. Bazzano, F. 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. |
| [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. Accinelli, J. 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. Accinelli, B. Bazzano, F. 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. |
| [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. Accinelli, J. 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 2.
A country in poverty trap
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