Why Might a Country Want to Develop its Comparative Disadvantage Industries?
AbstractThis paper develops a general equilibrium 2x2 Ricardian model that demonstrates the possibility of immiserizing growth as a result of a productivity improvement in a country's export industry. The model also shows that immiserizing growth can be avoided by improving the productivity of the country's comparative disadvantage industry. However this strategy may inflict harm on its trading partner. In comparison, a balanced growth strategy can improve welfare of the growing country without hurting its trading partner.
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Bibliographic InfoPaper provided by Monash University, Department of Economics in its series Monash Economics Working Papers with number 15/05.
Length: 15 pages
Date of creation: 01 Sep 2005
Date of revision:
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Postal: Department of Economics, Monash University, Victoria 3800, Australia
Web page: http://www.buseco.monash.edu.au/eco/
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Find related papers by JEL classification:
- F10 - International Economics - - Trade - - - General
- F11 - International Economics - - Trade - - - Neoclassical Models of Trade
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- Bhagwati, Jagdish N, 1969. "Optimal Policies and Immiserizing Growth," American Economic Review, American Economic Association, vol. 59(5), pages 967-70, December.
- Melvin, James R, 1969. "Demand Conditions and Immiserizing Growth," American Economic Review, American Economic Association, vol. 59(4), pages 604-06, Part I Se.
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