Pattern of Trade and Economic Development in the Model of Monopolistic Competition
AbstractThe paper introduces differences in production and transaction conditions between countries into the model of monopolistic competition to investigate the interplay between trade policies and development strategies. It applies inframarginal analysis, which is total benefit analysis between corner solutions in addition to marginal analysis of each corner solution, to show that as transaction conditions are improved, the general equilibrium may discontinuously jump across different patterns of trade and economic development. It compares the marginal and inframarginal comparative statics of equilibrium in the model of monopolistic competition with the core theorems in the neoclassical trade models and with conventional wisdom in development economics. It shows that as analytical framework is altered, the meanings of concepts and related empirical observations will be changed too.
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Bibliographic InfoPaper provided by Center for International Development at Harvard University in its series CID Working Papers with number 14.
Date of creation: Apr 1999
Date of revision:
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Postal: Center for International Development at Harvard University (CID). 79 John F. Kennedy Street, Cambridge, MA 02138.
Web page: http://www.cid.harvard.edu/cidwp/
More information through EDIRC
trade pattern; development strategy; income distribution; terms of trade;
Other versions of this item:
- Sachs, J.D. & Yang, X., 1999. "Pattern of Trade and Economic Development in the Model of Monopolistic Competition," Papers 14, Chicago - Graduate School of Business.
- F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
- F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
- O10 - Economic Development, Technological Change, and Growth - - Economic Development - - - General
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