This paper analyzes the dynamics of a 2 × 2 × 2 Heckscher-Ohlin model where foreign asset holdings and capital accumulation are independently determined by optimizing agents. Each country has two production sectors, both of whose products are used for consumption, and an investment sector,...

Constructing a dynamic Heckscher-Ohlin model, we examine long-run specialization patterns in the presence of international technological differences. Even a slight difference in technology causes at least one country to specialize. Either the case of perfect specialization in both countries or...