The role of quality ladders in a Ricardian model of trade with nonhomothetic preference
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 o¤er the same scope for improvements in terms of subsequent quality upgrading of final products.
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Bibliographic InfoPaper provided by Department of Economics, City University London in its series Working Papers with number 09/01.
Date of creation: 2009
Date of revision:
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Postal: Department of Economics, Social Sciences Building, City University London, Whiskin Street, London, EC1R 0JD, United Kingdom,
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international trade; quality ladders; nonhomothetic preferences;
Other versions of this item:
- Esteban Jaimovich & Vincenzo Merella, 2008. "The Role of Quality Ladders in a Ricardian Model of Trade with Nonhomothetic Preferences," Carlo Alberto Notebooks 81, Collegio Carlo Alberto.
- 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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