We develop a model of international trade with increasing returns to scale by taking into account the possibility of cooperation among agents in an egalitarian economy. It is shown that each country gains from trade in a trading world in which there are arbitrary numbers of...

In two-sector infinite-horizon trade models with factor–price-equalization, convergence of aggregate capital-labor ratios and incomes does not occur because the Euler equations imply equal growth rate of consumption in all economies. In a two-country dynamic specific factors model, we show...