Article ID Journal Published Year Pages File Type
966176 Journal of Macroeconomics 2008 12 Pages PDF
Abstract
Several theoretical and empirical studies on economic growth consider the macroeconomic elasticity of substitution between capital and labor as a measure of economic flexibility that depends on technological as well as institutional aspects. One institutional aspect of economic flexibility is openness to trade. I examine in a Heckscher-Ohlin model with two large countries trading intermediate goods how openness affects the elasticity of substitution. If the technology has a constant elasticity of substitution in a closed economy, opening up to trade raises the elasticity of substitution only in the country that accumulates capital at a faster rate.
Related Topics
Social Sciences and Humanities Economics, Econometrics and Finance Economics and Econometrics
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