Study on Economic Convergence Employing the 2.2.2 Model of Heckscher-Ohlin

Abstract

This article presents a methodology to estimate disparities in factor endowments in a dynamic Heckscher-Ohlin model. The model integrates a static approach to intraindustry trade of two goods and two factors. By employing a Cobb-Douglas production function model (2 goods, 2 factors), we identify convergences and divergences in production, influenced by the elasticity of substitution between inputs. Our findings illustrate that, even if factor prices equalize, countries differing only in their initial capital-to-labor ratios may converge or diverge in income levels over time. Divergence can occur for parameter values that would imply convergence in a world of closed economies, and open ones.   Received: 15 March 2024 / Accepted: 16 June 2024 / Published: 02 July 2024