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Trade and Development in a Labor Surplus Economy

  • Barbier Edward B

    ()

    (University of Wyoming)

  • Rauscher Michael

    ()

    (Rostock University)

This paper looks at a model in which two countries trade agricultural and manufactured commodities. The manufactured-goods sector produces with increasing returns to scale under conditions of monopolistic competition. It is shown that an increase in land endowment (or an increase in agricultural productivity) can have negative welfare implications for both countries. This outcome can result under three different scenarios: asymmetries across countries, i.e. a North-South model, a neoclassical labor market instead of a Lewisian market in the home country, and alternative utility functions.

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File URL: http://www.degruyter.com/view/j/bejeap.2007.7.1/bejeap.2007.7.1.1665/bejeap.2007.7.1.1665.xml?format=INT
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Article provided by De Gruyter in its journal The B.E. Journal of Economic Analysis & Policy.

Volume (Year): 7 (2007)
Issue (Month): 1 (August)
Pages: 1-36

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Handle: RePEc:bpj:bejeap:v:7:y:2007:i:1:n:45
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References listed on IDEAS
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  1. Taylor, A.M., 1991. "Capital Flows to the New World as an Intergenerational Transfer," Harvard Institute of Economic Research Working Papers 1579, Harvard - Institute of Economic Research.
  2. Findlay, R., 1991. "The Roots of Divergence: Western Economic History in Comparative Perspective," Discussion Papers 1991_51, Columbia University, Department of Economics.
  3. Kiminori Matsuyama, 1990. "Agricultural Productivity, Comparative Advantage, and Economic Growth," Discussion Papers 934, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  4. Edward B. Barbier, 2005. "Frontier Expansion and Economic Development," Contemporary Economic Policy, Western Economic Association International, vol. 23(2), pages 286-303, 04.
  5. Krugman, Paul, 1981. "Trade, accumulation, and uneven development," Journal of Development Economics, Elsevier, vol. 8(2), pages 149-161, April.
  6. Dixit, Avinash K & Stiglitz, Joseph E, 1975. "Monopolistic Competition and Optimum Product Diversity," The Warwick Economics Research Paper Series (TWERPS) 64, University of Warwick, Department of Economics.
  7. Burgstaller, A. & Saavedra-Rivano, N., 1984. "Capital mobility and growth in a North-South model," Journal of Development Economics, Elsevier, vol. 15(1-3), pages 213-237.
  8. Findlay, Ronald, 1980. "The Terms of Trade and Equilibrium Growth in the World Economy," American Economic Review, American Economic Association, vol. 70(3), pages 291-99, June.
  9. Krugman, Paul, 1980. "Scale Economies, Product Differentiation, and the Pattern of Trade," American Economic Review, American Economic Association, vol. 70(5), pages 950-59, December.
  10. Joseph Francois & Hans Van Meijl & Frank Van Tongeren, 2005. "Trade liberalization in the Doha Development Round," Economic Policy, CEPR;CES;MSH, vol. 20(42), pages 349-391, 04.
  11. Krugman, Paul R., 1979. "Increasing returns, monopolistic competition, and international trade," Journal of International Economics, Elsevier, vol. 9(4), pages 469-479, November.
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