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The International Demonstration Effect And The Domestic Division Of Labour: A Simple Model

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  • Po‐Ting Liu
  • Guang‐Zhen Sun

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 the IDE, the first of its kind, showing that, far more complicated than the scenario held by conventional wisdom, the IDE makes more difficult the emergence of the market underpinning the domestic division of labour, but facilitates the expansion of the market once it has been developed.

Suggested Citation

  • Po‐Ting Liu & Guang‐Zhen Sun, 2005. "The International Demonstration Effect And The Domestic Division Of Labour: A Simple Model," Pacific Economic Review, Wiley Blackwell, vol. 10(4), pages 515-528, December.
    • Handle: RePEc:bla:pacecr:v:10:y:2005:i:4:p:515-528
    DOI: 10.1111/j.1468-0106.2005.00289.x
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    References listed on IDEAS

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    1. H. W. Singer, 1975. "The Strategy of International Development," Palgrave Macmillan Books, Palgrave Macmillan, number 978-1-349-04228-9, March.
    2. Erzo F. P. Luttmer, 2005. "Neighbors as Negatives: Relative Earnings and Well-Being," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 120(3), pages 963-1002.
    3. Enrichetta Ravina, 2005. "Keeping Up with the Joneses: Evidence from Micro Data," 2005 Meeting Papers 557, Society for Economic Dynamics.
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    Cited by:

    1. Durga P. Gautam, 2014. "Remittances and Governance: Does the Government Free Ride?," Working Papers 14-40, Department of Economics, West Virginia University.

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    More about this item

    JEL classification:

    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development

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