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Why Might a Country Want to Develop its Comparative Disadvantage Industries?

Author

Listed:
  • Wenli Cheng
  • Dingsheng Zhang

Abstract

This 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.

Suggested Citation

  • Wenli Cheng & Dingsheng Zhang, 2005. "Why Might a Country Want to Develop its Comparative Disadvantage Industries?," Monash Economics Working Papers 15/05, Monash University, Department of Economics.
    • Handle: RePEc:mos:moswps:2005-15
    as

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    File URL: http://www.buseco.monash.edu.au/eco/research/papers/2005/1505comparativedisadvantageindustries.pdf
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    References listed on IDEAS

    as
    1. Jagdish N. Bhagwati, 1968. "Distortions and Immiserizing Growth: a Generalization," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 35(4), pages 481-485.
    2. Bhagwati, Jagdish N, 1969. "Optimal Policies and Immiserizing Growth," American Economic Review, American Economic Association, vol. 59(5), pages 967-970, December.
    3. Melvin, James R, 1969. "Demand Conditions and Immiserizing Growth," American Economic Review, American Economic Association, vol. 59(4), pages 604-606, Part I Se.
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    More about this item

    Keywords

    2x2 Ricardian model; immiserizing growth; balanced growth;
    All these keywords.

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade

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