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Implications of unequal rates of population growth for trade: An overlapping generationsgeneral equilibrium analysis within the Heckscher-Ohlin framework

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2005-12
Sayan, Serdar
Jelassi, Mehdi
This paper considers a two-country world where countries have unequal population growth rates, and presents closed-form solutions to a two-sector overlapping generations model to explore possible implications of differential population dynamics for trade. The countries are characterized by identical preferences and production technologies as in the static Heckscher-Ohlin (HO) framework. Our results reveal that differences in population growth rates will create comparative advantages in the same way as suggested by the static HO model, but contrary to the predictions of this model, free trade will not necessarily imply welfare gains for both parties.