The Role of Quality Ladders in a Ricardian Model of Trade with Nonhomothetic Preferences
AbstractThe literature on North-South trade has explored conditions under which international trade might be a factor magnifying income disparities between the advanced North and the backward South. Little attention has yet been placed on the effect of trade on countries that do not display substantial dissimilarities concerning capital endowments. We show that even when no single country is technologically more advanced than any other one and productivity changes are uniform and identical in all countries, international trade may still be a source of income divergence. Income divergence will be experienced when comparative advantages induce patterns of specialisation that, although optimal for each country at some initial point in time, do not offer the same scope for improvements in terms of subsequent quality upgrading of final products.
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Bibliographic InfoPaper provided by Collegio Carlo Alberto in its series Carlo Alberto Notebooks with number 81.
Length: 43 pages
Date of creation: 2008
Date of revision:
International Trade; Quality Ladders; Nonhomothetic Preferences;
Other versions of this item:
- Jaimovich, E. & Merella, V., 2009. "The role of quality ladders in a Ricardian model of trade with nonhomothetic preference," Working Papers 09/01, Department of Economics, City University London.
- F11 - International Economics - - Trade - - - Neoclassical Models of Trade
- F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
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