In models in which convergence in income levels across closed countries is driven by faster accumulation of a … productive factor in the poorer countries, opening these countries to trade can stop convergence and even cause divergence. We …. Divergence can occur for parameter values that would imply convergence in a world of closed economies and vice versa. Second …

countries involved. We contrast bargaining and perfect competition. Under perfect capital markets, convergence of capital and … convergence of the income shares, with unionized countries showing a lower wage rate and consequent capital inflows. Therefore …