Volume 4, Issue 1

Abstract. We present models that allow the use of unskilled and skilled labor as well as capital and land. Thus agriculture, important in developing countries, can be included as well as two types of labor and a single (or two) type(s) of physical capital. The models are related to the simple 3x2 specific factors structure by means of what is called the linear neighborhood structure, wherein no activity uses more than two factors, and the two types of labor work in separated sectors, using in common a type of physical capital. We discuss how wage rate changes are related when endowments change, when agriculture becomes traded and prices rise, and when unskilled labor becomes educated and joins the ranks of skilled workers.

Before the reform in the 1960s, twin vicious circles perpetuated the shortages of foreign exchange and labor skill, and prevented the Korean economy from realizing its considerable growth potential. The breakthrough came when the Japanese labor shortage facilitated Korean exports, after economic normalization between the two countries. The reformed institutions reduced rent-seeking and refocused Korean managerial efforts to pioneering activities. The Korean takeoff scenario is a shared theme among all four Asian newly industrialized economies cited by Lucas (1988) as showcases.

The flying geese (FG) hypothesis, which asserts the sequential catching-up processes of the latecomers, holds well in the past. Yet a simultaneous boom within the electronics industry across East Asia casts doubt on the applicability of the hypothesis. By using the RCA and NET indices, the paper finds that the FG pattern shows in the electronics industry as a whole, but not always so at the disaggregated level. This suggests that the FG formation may not appear in other industries, if they are involved in international production fragmentation or have differentiated products, and if certain latecomers have become new leaders.

This paper analyzes and solves miniature Walrasian general equilibrium systems of momentary and moving equilibria. The Walrasian framework encompasses the fundamental neoclassical and classical two-sector growth models; the families of solutions of steady-state and persistent growth per capita in various competitive two-sector economies are parametrically characterized. Moreover, the endogenous behavior of relative prices and the sectoral allocation of primary factors are analyzed in detail. The technology parameters of the capital good industry are decisive for obtaining long-run per capita growth in closed (global) economies. A review of the literature complements the theorems on the general equilibrium allocations, dynamic systems, and the time paths of Walrasian two-sector economies.

Economic globalization causes an increasing international fragmentation (disintegration) of value-added chains, whereby firms outsource components of production to foreign markets. There is a high level of concern about unwelcome distributional effects. This paper provides a theoretical treatment of this issue within a general Heckscher-Ohlin framework, allowing for an arbitrary number of goods, factors, and fragments. It shows how a fragmented production equilibrium is disturbed by lower costs of fragmentation, and it introduces the concept of effective prices of fragments to derive general results that characterize the distributional consequences of an increase in international fragmentation occurring simultaneously in several industries.

This paper analyses the role of inflation in economies with endogenous growth and congestion in public services. Optimal policy rules are derived for public services and investment. The other findings are as follows. Monetary policy should maximize economic growth. The more inefficient the public sector is, the higher the growth-maximizing inflation rate is. If a currency union accepts a new member with an inefficient public sector, this will boost inflation in the union and decrease growth and welfare in all member economies of the union.