A Growth Theory Based on Walrasian General Equilibrium, Solow-Uzawa Growth, and Heckscher-Ohlin Trade Theories

The purpose of this study is to analyse the role of preferences and technological differences between countries in determining dynamics of capital accumulation, wealth and income distribution within countries and between countries, and patterns of trade in a dynamic general equilibrium framework. The model is built by integrating Walrasian general equilibrium, neoclassical growth, and H O international trade theories. The model is built for any number of countries and each country is composed of three production sectors and heterogeneous households. The national growth mechanism is the same as that in neoclassical growth theory. Labour and capital distributions among sectors and among countries are determined under perfect competition and free trade. The model synthesizes the well-known H O and the Oniki-Uzawa trade models, Solow-Uzawa neoclassical growth theory, and Walrasian general equilibrium theory with Zhang’s utility function. We simulated the model with three national economies and with two groups of households for each country. We identified the existence of equilibrium points and plot motion of the dynamic system. We also conducted a comparative dynamic analysis