Convergence, Divergence and Changing Trade Patterns

This study constitutes a theoretical inquiry into the reasons for convergence, divergence and, in a trade-theoretic perspective, for a reversal of trade patterns. It describes various mechanisms determining factor rewards and the change of trade patterns of growing economies. Special attention is paid to the effects of internationally differing preferences, unequal factor accumulation, technological change and government intervention. The chapters are in the tradition of the "new" growth and trade theory and elaborate novel results, especially with respect to factor rewards, convergence and trade patterns. It also contains appendices to the individual chapters deriving the results in the main text in an explicit and informative manner. The central motivation of this book is to theoretically determine reasons of changing trade patterns. Due to the close relationship of trade pattern reversal to convergence and factor price equalization, these issues are equally and thoroughly covered. The context is provided by endogenously growing economies embedded in a two-country world.