Per Capita Income Demand for Variety, and International Trade: Linder Reconsidered
AbstractWe analyse a monopolistically competitive model of international trade where goods must be consumed in indivisible amounts. The number of varieties that enter a consumer's optimal consumption bundle is increasing in the consumer's per capita income. We first show that, for a given level of GDP, less populous and richer economies have a larger equilibrium number of product varieties. We then show that in an integrated world, even when total GDP is kept constant in all markets, as the levels of and the similarity in the trading partners' per capita incomes increase, so do the number of varieties exchanged and the volume of bilateral trade flows, as conjectured in the Linder hypothesis. Implications for the distribution of gains from trade between and within countries are also discussed.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. 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.
Bibliographic InfoPaper provided by Centre for Economic Performance, LSE in its series CEP Discussion Papers with number dp0460.
Date of creation: Jun 2000
Date of revision:
Contact details of provider:
Web page: http://cep.lse.ac.uk/_new/publications/series.asp?prog=CEP
Per capita income; product variety; international trade;
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Helpman, Elhanan, 1987. "Imperfect competition and international trade: Evidence from fourteen industrial countries," Journal of the Japanese and International Economies, Elsevier, vol. 1(1), pages 62-81, March.
- Hunter, Linda, 1991. "The contribution of nonhomothetic preferences to trade," Journal of International Economics, Elsevier, vol. 30(3-4), pages 345-358, May.
- Helpman, Elhanan, 1981. "International trade in the presence of product differentiation, economies of scale and monopolistic competition : A Chamberlin-Heckscher-Ohlin approach," Journal of International Economics, Elsevier, vol. 11(3), pages 305-340, August.
- Anderson, James E, 1979. "A Theoretical Foundation for the Gravity Equation," American Economic Review, American Economic Association, vol. 69(1), pages 106-16, March.
- Donald R. Davis & David E. Weinstein, 2001.
"An Account of Global Factor Trade,"
American Economic Review,
American Economic Association, vol. 91(5), pages 1423-1453, December.
- Davis, D.R. & Weinstein, D.E., 1999. "An Account of Global Factor Trade," Working Papers 435, Research Seminar in International Economics, University of Michigan.
- Donald R. Davis & David E. Weinstein, 1998. "An Account of Global Factor Trade," Harvard Institute of Economic Research Working Papers 1849, Harvard - Institute of Economic Research.
- Donald R. Davis & David E. Weinstein, 1998. "An Account of Global Factor Trade," NBER Working Papers 6785, National Bureau of Economic Research, Inc.
- Dow, James & Werlang, Sérgio Ribeiro da Costa, 1991.
Economics Working Papers (Ensaios Economicos da EPGE)
176, FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).
- Davis, Donald R, 1997. "Critical Evidence on Comparative Advantage? North-North Trade in a Multilateral World," Journal of Political Economy, University of Chicago Press, vol. 105(5), pages 1051-60, October.
- Alexander Tarasov, 2012.
"Trade Liberalization and Welfare Inequality: A Demand-Based Approach,"
Scandinavian Journal of Economics,
Wiley Blackwell, vol. 114(4), pages 1296-1317, December.
- Tarasov, Alexander, 2010. "Trade Liberalization and Welfare Inequality: a Demand-Based Approach," Discussion Papers in Economics 11492, University of Munich, Department of Economics.
- Tarasov, Alexander, 2008. "Trade Liberalization and Welfare Inequality: a Demand-Based Approach," MPRA Paper 20199, University Library of Munich, Germany, revised Jan 2010.
- Mitchell, Lorraine, 2006. "Variety, Agricultural Trade, and Income," 2006 Annual meeting, July 23-26, Long Beach, CA 21246, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.