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Monopolistic Competition and North–South Trade

Author

Listed:
  • Reza Oladi
  • John Gilbert

Abstract

We examine the consequences of opening to international trade for a developing economy with open urban unemployment and rural-urban migration, where the urban sector is monopolistically competitive. We show that there exists a threshold level of urbanization prior to which increases in product variety will be reflected in increased urban unemployment, that opening to intra-industry trade with a high-wage economy (i.e., North-South trade) will reduce the rate of urban unemployment by a greater amount than intra-industry trade with a similar economy, and that trade intervention in the South may lower welfare by reducing varieties produced in the North.
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Suggested Citation

  • Reza Oladi & John Gilbert, 2011. "Monopolistic Competition and North–South Trade," Review of International Economics, Wiley Blackwell, vol. 19(3), pages 459-474, August.
  • Handle: RePEc:bla:reviec:v:19:y:2011:i:3:p:459-474
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    Cited by:

    1. Beladi Hamid & Chakrabarti Avik & Marjit Sugata, 2015. "On Cross-Border Mergers and Product Differentiation," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 15(1), pages 1-15, January.
    2. John Gilbert & Hamid Beladi & Reza Oladi, 2015. "North–South Trade Liberalization and Economic Welfare," Review of Development Economics, Wiley Blackwell, vol. 19(4), pages 1006-1017, November.
    3. Reza Oladi & John Gilbert, 2015. "International Narcotics Trade, Foreign Aid, And Enforcement," Economic Inquiry, Western Economic Association International, vol. 53(3), pages 1630-1646, July.
    4. Ko, Chia Chiun & Frijters, Paul, 2014. "When Banana Import Restrictions Lead to Exports: A Tale of Cyclones and Quarantine Policies," IZA Discussion Papers 7988, Institute for the Study of Labor (IZA).
    5. Beladi, Hamid & Chao, Chi-Chur & Hollas, Daniel, 2013. "How growing asset inequality affects developing economies," Journal of Economics and Business, Elsevier, vol. 68(C), pages 43-51.

    More about this item

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure

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