A Ricardian Model with a Continuum of Goods under Nonhomothetic Preferences: Demand Complementarities, Income Distribution, and North-South Trade
AbstractThis paper develops a Ricardian model of trade in which goods are indexed according to priority and higher-indexed goods are consumed only by richer households. South (North) has a comparative advantage in lower- (higher-) indexed goods and, hence, specializes in goods with lower (higher) income elasticities of demand. Product cycles and a southern terms-of-trade deterioration result from faster population growth and uniform productivity growth in South and a global productivity improvement. South's domestic income redistribution policy can improve its terms of trade so much that every household in South may be better off, at the expense of North.
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Bibliographic InfoArticle provided by University of Chicago Press in its journal Journal of Political Economy.
Volume (Year): 108 (2000)
Issue (Month): 6 (December)
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Other versions of this item:
- Kiminori Matsuyama, 1999. "A Ricardian Model with a Continuum of Goods under Non-homothetic Preferences: Demand Complementarities, Income Distribution, and North-South Trade," Discussion Papers 1241, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- F11 - International Economics - - Trade - - - Neoclassical Models of Trade
- O11 - Economic Development, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
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