Welfare Effects of Technological Convergence in the Food Industries
In this paper we investigate the welfare effects of technological convergence in the food industries. We extend Krugman's (1980) monopolistic competition model to allow for technological differences between two (groups of) countries. Technological convergence is reflected in a narrowing inter-country gap between fixed or marginal production cost, and the effects of convergence on output composition, factor rewards, trade pattern, and consumer welfare are derived. The theoretical predictions are examined and confirmed using an internationally comparable dataset.
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