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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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  1. Rodriguez-Clare, Andres, 1996. "Multinationals, Linkages, and Economic Development," American Economic Review, American Economic Association, American Economic Association, vol. 86(4), pages 852-73, September.
  2. Kiminori Matsuyama, 1995. "Complementarities and Cumulative Processes in Models of Monopolistic Competition," Journal of Economic Literature, American Economic Association, American Economic Association, vol. 33(2), pages 701-729, June.
  3. 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.
  4. Muhammed Dalgin & Devashish Mitra & Vitor Trindade, 2004. "Inequality, Nonhomothetic Preferences, and Trade: A Gravity Approach," NBER Working Papers 10800, National Bureau of Economic Research, Inc.
  5. Kiminori Matsuyama, 2000. "A Ricardian Model with a Continuum of Goods under Nonhomothetic Preferences: Demand Complementarities, Income Distribution, and North-South Trade," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 108(6), pages 1093-1120, December.
  6. Murphy, Kevin M. & Shleifer, Andrei & Vishny, Robert W., 1989. "Industrialization and the Big Push," Scholarly Articles 3606235, Harvard University Department of Economics.
  7. 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.
  8. Foellmi, Reto & Zweimüller, Josef, 2005. "Income Distribution and Demand-Induced Innovations," CEPR Discussion Papers, C.E.P.R. Discussion Papers 4985, C.E.P.R. Discussion Papers.
  9. Devashish Mitra & Vitor Trindade, 2005. "Inequality and trade," Canadian Journal of Economics, Canadian Economics Association, Canadian Economics Association, vol. 38(4), pages 1253-1271, November.
  10. Melitz, Marc, 2005. "When and How Should Infant Industries Be Protected?," Scholarly Articles 3228378, Harvard University Department of Economics.
  11. Solow, Robert M., 2005. "Reflections on Growth Theory," Handbook of Economic Growth, Elsevier, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 0, pages 3-10 Elsevier.
  12. 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.
  13. R. Dornbusch & S. Fischer & P. A. Samuelson, 1976. "Comparative Advantage, Trade and Payments in a Ricardian Model With a Continuum of Goods," Working papers, Massachusetts Institute of Technology (MIT), Department of Economics 178, Massachusetts Institute of Technology (MIT), Department of Economics.
  14. L. Alan Winters & Shahid Yusuf, 2007. "Dancing with the Giants: China, India, and the Global Economy," World Bank Publications, The World Bank, number 6632, August.
  15. Pundarik Mukhopadhaya, 2004. "World Income Inequality data base (WIID) Review," Journal of Economic Inequality, Springer, Springer, vol. 2(3), pages 229-234, December.
  16. 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.
  17. Krugman, Paul, 1980. "Scale Economies, Product Differentiation, and the Pattern of Trade," American Economic Review, American Economic Association, American Economic Association, vol. 70(5), pages 950-59, December.
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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, University of St. Gallen, School of Economics and Political Science 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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