Aging, transitional dynamics, and gains from trade

Takumi Naito, Laixun Zhao

Research output: Contribution to journalArticle

12 Citations (Scopus)

Abstract

We formulate a two-country, two-good, two-factor, two-period-lived overlapping generations model to examine how population aging determines the pattern of and gains from trade. Two main results are obtained. First, the aging country endogenously becomes a small country exporting the capital-intensive good, whereas the younger country endogenously dominates the world economy determining the world prices, in the free trade steady state. Second, although uncompensated free trade cannot be Pareto superior to autarky, there exists a compensation scheme applied within each country such that free trade is Pareto superior to autarky.

Original languageEnglish
Pages (from-to)1531-1542
Number of pages12
JournalJournal of Economic Dynamics and Control
Volume33
Issue number8
DOIs
Publication statusPublished - 2009 Aug 1
Externally publishedYes

Keywords

  • Aging and trade
  • Compensation scheme
  • Gains from trade
  • Overlapping generations model
  • Transitional dynamics

ASJC Scopus subject areas

  • Economics and Econometrics
  • Control and Optimization
  • Applied Mathematics

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