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Trade, demand spillovers and industrialization : The emerging global middle class in perspective

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  • Alain Desdoigts

    ()
    (Université Paris-Est - Cité Descartes, CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne)

  • Fernando Jaramillo

    ()
    (Universidad del Rosario - Facultad de Economia)

Abstract

In this paper, we investigate international demand spillovers brought about by a global middle class and their impact on trade patterns and industrialization. We propose a multi-industry and two-country trade model featuring demand complementarities propagating increasing returns across industries and national boundaries. We show how the international extent of demand spillovers depends upon asymmetries in domestic income distribution, labor efficiency, and labor force size ; that is, on the global distribution of real income.

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Paper provided by HAL in its series Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) with number halshs-00111186.

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Date of creation: Feb 2006
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Handle: RePEc:hal:cesptp:halshs-00111186

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Keywords: Trade; spillovers; nonhomothetic preferences; world income distribution.;

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References

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  1. Francois, Joseph F & Kaplan, Seth, 1996. "Aggregate Demand Shifts, Income Distribution, and the Linder Hypothesis," The Review of Economics and Statistics, MIT Press, vol. 78(2), pages 244-50, May.
  2. R. Dornbusch & S. Fischer & P. A. Samuelson, 1976. "Comparative Advantage, Trade and Payments in a Ricardian Model With a Continuum of Goods," Working papers 178, Massachusetts Institute of Technology (MIT), Department of Economics.
  3. Foellmi, Reto & Zweimüller, Josef, 2005. "Income Distribution and Demand-Induced Innovations," CEPR Discussion Papers 4985, C.E.P.R. Discussion Papers.
  4. Rodriguez-Clare, Andres, 1996. "Multinationals, Linkages, and Economic Development," American Economic Review, American Economic Association, vol. 86(4), pages 852-73, September.
  5. Kevin M. Murphy & Andrei Shleifer & Robert W. Vishny, 1988. "Industrialization and the Big Push," NBER Working Papers 2708, National Bureau of Economic Research, Inc.
  6. Devashish Mitra & Vitor Trindade, 2005. "Inequality and trade," Canadian Journal of Economics, Canadian Economics Association, vol. 38(4), pages 1253-1271, November.
  7. Krugman, Paul, 1980. "Scale Economies, Product Differentiation, and the Pattern of Trade," American Economic Review, American Economic Association, vol. 70(5), pages 950-59, December.
  8. Kiminiori Matsuyama, 1994. "Complementaries and Cumulative Processes In Models of Monopolistic Competition," Discussion Papers, Northwestern University, Center for Mathematical Studies in Economics and Management Science 1106, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  9. Muhammed Dalgin & Vitor Trindade & Devashish Mitra, 2008. "Inequality, Nonhomothetic Preferences, and Trade: A Gravity Approach," Southern Economic Journal, Southern Economic Association, vol. 74(3), pages 747-774, January.
  10. Murphy, Kevin M & Shleifer, Andrei & Vishny, Robert W, 1989. "Income Distribution, Market Size, and Industrialization," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 104(3), pages 537-64, August.
  11. 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, Northwestern University, Center for Mathematical Studies in Economics and Management Science 1241, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  12. Melitz, Marc J., 2005. "When and how should infant industries be protected?," Journal of International Economics, Elsevier, vol. 66(1), pages 177-196, May.
  13. Pundarik Mukhopadhaya, 2004. "World Income Inequality data base (WIID) Review," Journal of Economic Inequality, Springer, Springer, vol. 2(3), pages 229-234, December.
  14. Helpman, Elhanan, 1984. "Increasing returns, imperfect markets, and trade theory," Handbook of International Economics, Elsevier, in: R. W. Jones & P. B. Kenen (ed.), Handbook of International Economics, edition 1, volume 1, chapter 7, pages 325-365 Elsevier.
  15. L. Alan Winters & Shahid Yusuf, 2007. "Dancing with the Giants: China, India, and the Global Economy," World Bank Publications, The World Bank, number 6632, October.
  16. Solow, Robert M., 2005. "Reflections on Growth Theory," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 0, pages 3-10 Elsevier.
  17. Ethier, Wilfred J, 1982. "Decreasing Costs in International Trade and Frank Graham's Argument for Protection," Econometrica, Econometric Society, Econometric Society, vol. 50(5), pages 1243-68, September.
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Cited by:
  1. Föllmi, Reto & Hepenstrick, Christian & Zweimüller, Josef, 2011. "Non-homothetic preferences, parallel imports and the extensive margin of international trade," Economics Working Paper Series 1122, University of St. Gallen, School of Economics and Political Science.
  2. Ncube, Mthuli & Shimeles, Abebe, 2013. "The Making of Middle Class in Africa: Evidence from DHS Data," IZA Discussion Papers 7352, Institute for the Study of Labor (IZA).

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