An "Austrian" Model of International Trade and Interest Rate Equalization
Journal of Political Economy
1978
This paper constructs a model of trade in which an intermediate good is produced by an "Austrian" point-input-point-output process of variable duration while the finished good is produced instantaneously by labor alone. The rate of time preference is a function of the level of stationary consumption and the two countries differ in the rate at which they discount the future. It is shown that the less "impatient" country will export the time-intensive intermediate good and import the finished good, with both countries incompletely specialized and the rate of interest and real wage equalized.
- DOI
- 10.1086/260725
- Volume
- 86 (6)
- Pages
- 989-1007
- Language
- en
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