Factor Accumulation and Trade: Dynamic Comparative Advantage with Endogenous Human Capital

This paper develops a two country endogenous growth model with accumulation of both physical and human capital. We establish the existence of two country balanced growth equilibria with physical and human capital growing at the same rate in which a static and dynamic version of the Heckscher-Ohlin hypothesis hold true. We also show the existence of unbalanced growth equilibria in which the static and dynamic Heckscher-Ohlin hypotheses can be violated. The multiplicity of paths with international trade emerges, resulting from the intertemporal no-arbitrage condition in cases where trade leads to an equalization of factor prices across countries.