IDEAS home Printed from https://ideas.repec.org/p/lan/wpaper/578283.html
   My bibliography  Save this paper

What does the eclectic trade model say about the Samuelson conundrum?

Author

Listed:
  • K T Soo

Abstract

Can growth of a trading partner harm a country? This paper seeks to answer this question through the use of an eclectic trade model which is similar in flavour to Markusen (1986). This paper makes two contributions. First, it develops a simple and tractable model of international trade based on a combination of imperfectcompetition, comparative advantage, and identical but non-homothetic preferences in a three country framework. Second, it uses this framework to consider the possibility of losses from partner-country growth in a free-trading environment. We find that the presence of nonhomothetic preferences in particular, leads to a home bias in consumption which dampens any negative welfare effects when a country's trading partners grow.

Suggested Citation

  • K T Soo, 2006. "What does the eclectic trade model say about the Samuelson conundrum?," Working Papers 578283, Lancaster University Management School, Economics Department.
    • Handle: RePEc:lan:wpaper:578283
    as

    Download full text from publisher

    File URL: http://www.lancaster.ac.uk/media/lancaster-university/content-assets/documents/lums/economics/working-papers/EclecticTrade_.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Devashish Mitra & Vitor Trindade, 2005. "Inequality and trade," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 38(4), pages 1253-1271, November.
    2. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June.
    3. Paul A. Samuelson, 2001. "A Ricardo-Sraffa Paradigm Comparing Gains from Trade in Inputs and Finished Goods," Journal of Economic Literature, American Economic Association, vol. 39(4), pages 1204-1214, December.
    4. 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, vol. 108(6), pages 1093-1120, December.
    5. Paul A. Samuelson, 2004. "Where Ricardo and Mill Rebut and Confirm Arguments of Mainstream Economists Supporting Globalization," Journal of Economic Perspectives, American Economic Association, vol. 18(3), pages 135-146, Summer.
    6. James R. Markusen, 2021. "Explaining the Volume of Trade: An Eclectic Approach," World Scientific Book Chapters, in: BROADENING TRADE THEORY Incorporating Market Realities into Traditional Models, chapter 9, pages 177-186, World Scientific Publishing Co. Pte. Ltd..
    7. Krugman, Paul R., 1979. "Increasing returns, monopolistic competition, and international trade," Journal of International Economics, Elsevier, vol. 9(4), pages 469-479, November.
    8. Wacziarg, Romain & Wallack, Jessica Seddon, 2004. "Trade liberalization and intersectoral labor movements," Journal of International Economics, Elsevier, vol. 64(2), pages 411-439, December.
    9. Krugman, Paul R, 1981. "Intraindustry Specialization and the Gains from Trade," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 959-973, October.
    10. Jagdish Bhagwati, 1958. "Immiserizing Growth: A Geometrical Note," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 25(3), pages 201-205.
    11. P Ramezzana, 2000. "Per Capita Income Demand for Variety, and International Trade: Linder Reconsidered," CEP Discussion Papers dp0460, Centre for Economic Performance, LSE.
    12. Nancy L. Stokey, 1991. "The Volume and Composition of Trade Between Rich and Poor Countries," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 58(1), pages 63-80.
    13. Jagdish Bhagwati & Arvind Panagariya & T. N. Srinivasan, 1998. "Lectures on International Trade, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262522470, December.
    14. Ramezzana, Paolo, 2000. "Per capita income demand for variety, and international trade: Linder reconsidered," LSE Research Online Documents on Economics 20184, London School of Economics and Political Science, LSE Library.
    15. Hunter, Linda, 1991. "The contribution of nonhomothetic preferences to trade," Journal of International Economics, Elsevier, vol. 30(3-4), pages 345-358, May.
    16. Donghoon Lee & Kenneth I. Wolpin, 2006. "Intersectoral Labor Mobility and the Growth of the Service Sector," Econometrica, Econometric Society, vol. 74(1), pages 1-46, January.
    17. Anderson, James E, 1979. "A Theoretical Foundation for the Gravity Equation," American Economic Review, American Economic Association, vol. 69(1), pages 106-116, March.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. repec:lan:wpaper:3064 is not listed on IDEAS
    2. repec:lan:wpaper:3341 is not listed on IDEAS
    3. repec:lan:wpaper:3155 is not listed on IDEAS
    4. repec:lan:wpaper:3062 is not listed on IDEAS
    5. 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.
    6. Tarasov Alexander, 2009. "Income Distribution, Market Structure, and Individual Welfare," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 9(1), pages 1-39, December.
    7. David Hummels & Chong Xiang & Yo Chul Choi, 2010. "Explaining Import Variety and Quality: the Role of the Income Distribution," LIS Working papers 541, LIS Cross-National Data Center in Luxembourg.
    8. Pablo Fajgelbaum & Gene M. Grossman & Elhanan Helpman, 2011. "Income Distribution, Product Quality, and International Trade," Journal of Political Economy, University of Chicago Press, vol. 119(4), pages 721-765.
    9. Tarasov, Alexander, 2012. "Per capita income, market access costs, and trade volumes," Journal of International Economics, Elsevier, vol. 86(2), pages 284-294.
    10. James R. Markusen, 2021. "Putting per-capita income back into trade theory," World Scientific Book Chapters, in: BROADENING TRADE THEORY Incorporating Market Realities into Traditional Models, chapter 10, pages 187-197, World Scientific Publishing Co. Pte. Ltd..
    11. Behrens, Kristian & Murata, Yasusada, 2012. "Globalization and individual gains from trade," Journal of Monetary Economics, Elsevier, vol. 59(8), pages 703-720.
    12. Xuepeng Liu, 2009. "Trade and income convergence: Sorting out the causality," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 18(1), pages 169-195.
    13. Devashish Mitra & Vitor Trindade, 2005. "Inequality and trade," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 38(4), pages 1253-1271, November.
    14. Yo Chul Choi & David Hummels & Chong Xiang, 2006. "Explaining Import Variety and Quality: The Role of the Income Distribution," NBER Working Papers 12531, National Bureau of Economic Research, Inc.
    15. Lilas Demmou, 2007. "Technical progress in North and welfare gains in South under nonhomothetic preferences," Working Papers halshs-00588310, HAL.
    16. E. Gencer & William Anderson, 2014. "An intra-industry trade model in a vertical differentiation framework," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 52(1), pages 201-226, January.
    17. Brooks, Eileen L., 2006. "Why don't firms export more? Product quality and Colombian plants," Journal of Development Economics, Elsevier, vol. 80(1), pages 160-178, June.
    18. Jaimovich, Esteban & Merella, Vincenzo, 2015. "Love for quality, comparative advantage, and trade," Journal of International Economics, Elsevier, vol. 97(2), pages 376-391.
    19. Reto Foellmi & Christian Hepenstrick & Josef Zweim ller, 2010. "Non-homothetic preferences, parallel imports and the extensive margin of international trade," Diskussionsschriften dp1009, Universitaet Bern, Departement Volkswirtschaft.
    20. Kiminori Matsuyama, 2019. "Engel's Law in the Global Economy: Demand‐Induced Patterns of Structural Change, Innovation, and Trade," Econometrica, Econometric Society, vol. 87(2), pages 497-528, March.
    21. Raphael Bergoeing & Timothy J. Kehoe, "undated". "Trade Theory and Trade Facts," ILADES-UAH Working Papers inv129, Universidad Alberto Hurtado/School of Economics and Business.
    22. Alan V. Deardorff, 2011. "Determinants of Bilateral Trade: Does Gravity Work in a Neoclassical World?," World Scientific Book Chapters, in: Robert M Stern (ed.), Comparative Advantage, Growth, And The Gains From Trade And Globalization A Festschrift in Honor of Alan V Deardorff, chapter 24, pages 267-293, World Scientific Publishing Co. Pte. Ltd..
    23. Kugler, Maurice, 2000. "International trade when inequality determines aggregate demand," Discussion Paper Series In Economics And Econometrics 0024, Economics Division, School of Social Sciences, University of Southampton.
    24. Santra, Sattwik, 2014. "Non-homothetic preferences: Explaining unidirectional movements in wage differentials," Journal of Development Economics, Elsevier, vol. 109(C), pages 87-97.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:lan:wpaper:578283. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Giorgio Motta (email available below). General contact details of provider: https://edirc.repec.org/data/delanuk.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.