FACTOR ACCUMULATION AND THE TERMS OF TRADE: APPLICATIONS TO THE ASIAN FINANCIAL CRISIS

This paper investigates the effects of population growth and capital accumulation on trade and welfare. In the absence of a terms of trade effect, an population increase reduces the standard of living and causes a reduction in welfare. An increase in population causes deterioration in the terms of trade of a labour abundant country, whereas capital accumulation improves them, regardless of the source of growth. Moreover, an increase in the South's population is immiserizing. Copyright 2006 The Authors Journal compilation 2006 Blackwell Publishing Ltd