This paper develops the seminal ideas of Nicholas Kaldor into a Centre-Periphery framework of the world economy, where the Centre faces the problem of surplus capacity and effective demand and the Periphery faces a capacity constraint. In such a framework, a Harrod-type 'foreign trade multiplier' works in a short-run partial equilibrium analysis: a rise in the Periphery's output increases demand for output of the Centre. There is some ambiguity in the short-run effect of the peripheral terms of trade on the output of the Centre. In the long-run equilibrium growth of the whole framework, the 'foreign trade multiplier' does not work. A rise in factor productivity or the growth rate in the Periphery leads to a fall in its terms of trade while the Centre remains unaffected. A rise in the productivity in the Centre affects its factor income, not its terms of trade.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
page. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.