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Trade and Development in a Labor Surplus Economy

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Author Info

  • Edward B. Barbier

    (University of Wyoming)

  • Michael Rauscher

    (Rostock University)

Abstract

This paper looks at a model in which two countries trade agricultural and manufactured commodities. The manufactured-goods sector produces with increasing returns to scale under conditions of monopolistic competition. It is shown that an increase in land endowment (or an increase in agricultural productivity) can have negative welfare implications for both countries. This outcome can result under three different scenarios: asymmetries across countries, i.e. a North-South model, a neoclassical labor market instead of a Lewisian market in the home country, and alternative utility functions.

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File URL: http://www.bepress.com/cgi/viewcontent.cgi?article=1665&context=bejeap
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Bibliographic Info

Article provided by Berkeley Electronic Press in its journal The B.E. Journal of Economic Analysis & Policy.

Volume (Year): 7 (2007)
Issue (Month): 1 ()
Pages: 45
Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Handle: RePEc:bpj:bejeap:v:7:y:2007:i:1:n:45

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Related research

Keywords: international trade; labor surplus economy; land expansion; monopolistic competition; North-South model;

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References

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  1. Kiminori Matsuyama, 1990. "Agricultural Productivity, Comparative Advantage, and Economic Growth," Discussion Papers 934, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  2. Taylor, Alan M & Williamson, Jeffrey G, 1994. "Capital Flows to the New World as an Intergenerational Transfer," Journal of Political Economy, University of Chicago Press, vol. 102(2), pages 348-71, April.
  3. Joseph Francois & Hans van Meijl & Frank van Tongeren, 2005. "Trade liberalization in the Doha Development Round," Economic Policy, CEPR & CES & MSH, vol. 20(42), pages 349-391, 04.
  4. Findlay, Ronald, 1992. "The Roots of Divergence: Western Economic History in Comparative Perspective," American Economic Review, American Economic Association, vol. 82(2), pages 158-61, May.
  5. Edward B. Barbier, 2005. "Frontier Expansion and Economic Development," Contemporary Economic Policy, Western Economic Association International, vol. 23(2), pages 286-303, 04.
  6. Krugman, Paul, 1980. "Scale Economies, Product Differentiation, and the Pattern of Trade," American Economic Review, American Economic Association, vol. 70(5), pages 950-59, December.
  7. Dixit, Avinash K & Stiglitz, Joseph E, 1975. "Monopolistic Competition and Optimum Product Diversity," The Warwick Economics Research Paper Series (TWERPS) 64, University of Warwick, Department of Economics.
  8. Burgstaller, A. & Saavedra-Rivano, N., 1984. "Capital mobility and growth in a North-South model," Journal of Development Economics, Elsevier, vol. 15(1-3), pages 213-237.
  9. Krugman, Paul, 1981. "Trade, accumulation, and uneven development," Journal of Development Economics, Elsevier, vol. 8(2), pages 149-161, April.
  10. Findlay, Ronald, 1980. "The Terms of Trade and Equilibrium Growth in the World Economy," American Economic Review, American Economic Association, vol. 70(3), pages 291-99, June.
  11. Krugman, Paul R., 1979. "Increasing returns, monopolistic competition, and international trade," Journal of International Economics, Elsevier, vol. 9(4), pages 469-479, November.
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Cited by:
  1. Beine, M & De Grauwe, Paul & Grimaldi, M, 2005. "The impact of FX Central Bank intervention in a noise trading framework," Open Access publications from Katholieke Universiteit Leuven urn:hdl:123456789/120954, Katholieke Universiteit Leuven.

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