Unless free international lending/borrowing is allowed, domestic saving equals domestic investment and hence saving and investment taxes have the identical effect, as is the case in a closed-economy context. However, if it is allowed, households can accumulate foreign assets besides domestic...

Specialization patterns in a dynamic Heckscher-Ohlin (HO) model with endogenous capital accumulation are examined in the presence of free international lending and borrowing. Without free international lending and borrowing it is known that, whereas the less (time-) patient country decumulates...