A variant of the standard Heckscher-Ohlin model, a model of a two-country world economy populated by Samuelsonian overlapping generations, is presented and then used in a welfare analysis of two international economic policy regimes: A laissez-faire regime, characterized by free trade in goods and complete freedom of portfolio choice; and a portfolio autarky regime, characterized by free trade in goods and a prohibition, applicable world-wide, on the ownership of foreign assets (land). Using a 'growth model' version of the traditional welfare criterion, it is shown that the laissez-faire regime is optimal and that the portfolio autarky regime is not.
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*The Federal Reserve Bank of Minneapolis, with which the authors are associated, endorse neither their analysis ncx their conclusions. They are, however, indebted to the Bank for its financial support of their research and to several of their University of Minnesota colleagues for helpful comments.