Specialization in a Dynamic Trade Model : An Overlapping Generations Case
نویسنده
چکیده
We explore a small-open economy with overlapping generations to understand what is the determinant of trade pattern in the dynamic trade theory. In the representative agent model (Baxter (1992) ), even if there are two goods and two production factors, opening up to trade leads to perfect specialization. Using the overlapping generations model, we find that the heterogeneity of the economic agents makes imperfect specialization occur generally. We also find that whether the stability condition holds or not is crucial for the determination of the production pattern.
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