NORMATIVE TRADE THEORY IN A CONTEXT OF OVERLAPPING GENERATIONS AND INTER-GENERATIONAL BEQUESTS

The core normative propositions of the theory of international trade have been established in the context of finite competitive economies of the Walras–Arrow–Debreu–McKenzie (WADM) type. Whether the propositions survive the recognition that economies might last for ever, with overlapping generations (OLGs) of mortal individuals and intergenerational bequests, is still unknown. In the present paper it is shown that none of the core propositions survives the recognition of inter-generational bequests but that, under a simple (but non-trivial) additional assumption, each of the core propositions is compatible both with OLGs and with inter-generational bequests.