Uncertain lifetimes and convergence in a two-country Heckscher-Ohlin model

In a two-country infinite-horizon model, with two traded goods and two factors of production and no international borrowing and lending, there is no convergence of incomes if there is factor-price equalization. With factor-price equalization, the Euler equations of the two economies become identical. I show that in such a set-up if agents have a non-zero probability of death, then we do get convergence. In the steady state the two economies have identical capital-labor ratios and revert to autarky. JEL Classification: F10, F11, F43.