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International Demonstration Effect and Domestic Division of Labour: A Simple Model

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Author Info
Po-Ting Liu
Guang-Zhen Sun

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Abstract

The implications of the international demonstration effect (IDE) for the development of underdeveloped economies have long been studied and debated. Yet few formal analyses exist in the literature, especially regarding its implications for the growth of domestic markets and the division of labour in developing economies. We offer an analysis of endogenous specialization under IDE, the first of its kind, showing that, far more complicated than the scenario held by conventional wisdom, IDE makes more difficult the emergence of the market underpinning the domestic division of labour, but facilitates the expansion of the market once the market has been developed.

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File URL: http://www.buseco.monash.edu.au/eco/research/papers/2005/1705demonstrationeffectanddivisionlabour.pdf
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Publisher Info
Paper provided by Monash University, Department of Economics in its series Monash Economics Working Papers with number 17/05.

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Length: 18 pages
Date of creation: 01 Oct 2005
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Handle: RePEc:mos:moswps:2005-17

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Related research
Keywords: External habit formation; specialization and division of labour; international demonstration effect; economic development; emergence and extent of the market.;

Find related papers by JEL classification:
O12 - Economic Development, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development

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This page was last updated on 2009-12-21.

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