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the Specialization of Production and Labour Mobility Under Endogenous Differentiation

  • L. Lambertini

This paper shows that market integration has controversial effects when countries are not similar in terms of income but may significantly differ in terms of consumer tastes and the cost of labour. The long run adjustments observed in the specialization of production (or product differentiation) and prices interact in non trivial ways with labour mobility (and the associated adjustment in the wage differential) to determine the relative performance of firms (as for equilibrium profits) and countries (as for equilibrium social welfare). It is shown that there are interesting cases where the welfare enjoyed by the larger country is smaller than the smaller counties’, due to relative distribution of demand and labour.

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Paper provided by Dipartimento Scienze Economiche, Universita' di Bologna in its series Working Papers with number 453.

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Date of creation: 2002
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Handle: RePEc:bol:bodewp:453
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  1. Beath,John & Katsoulacos,Yannis, 1991. "The Economic Theory of Product Differentiation," Cambridge Books, Cambridge University Press, number 9780521335263, june. pag.
  2. Motta, M., 1991. "Sunk costs and trade liberalisation," CORE Discussion Papers 1991027, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  3. 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.
  4. d'Aspremont, C & Gabszewicz, Jean Jaskold & Thisse, J-F, 1979. "On Hotelling's "Stability in Competition"," Econometrica, Econometric Society, vol. 47(5), pages 1145-50, September.
  5. Tabuchi, T. & Thisse, J.-F., . "Asymetric equilibria in spatial competition," CORE Discussion Papers RP 1151, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  6. Lambertini, Luca, 1997. "Unicity of the equilibrium in the unconstrained Hotelling model," Regional Science and Urban Economics, Elsevier, vol. 27(6), pages 785-798, November.
  7. Jaskold Gabszewicz, J. & Shaked, A. & Sutton, J. & Thisse, J.-F., . "International trade in differentiated products," CORE Discussion Papers RP 463, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  8. Krishna, Kala, 1990. "Protection and the Product Line: Monopoly and Product Quality," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 31(1), pages 87-102, February.
  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. Luca LAMBERTINI & Gianpaolo Rossini, 1998. "Quality choice and specialization in North-South trade," Discussion Papers (REL - Recherches Economiques de Louvain) 1998042, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  11. Giacomo Bonanno, 1987. "Location Choice, Product Proliferation and Entry Deterrence," Review of Economic Studies, Oxford University Press, vol. 54(1), pages 37-45.
  12. A. Michael Spence, 1975. "Monopoly, Quality, and Regulation," Bell Journal of Economics, The RAND Corporation, vol. 6(2), pages 417-429, Autumn.
  13. Nicolas Schmitt, 1990. "Two-Country Trade Liberalization in an Address Model of Product Differentiation," Canadian Journal of Economics, Canadian Economics Association, vol. 23(3), pages 654-75, August.
  14. Anderson, Simon P, 1988. "Equilibrium Existence in the Linear Model of Spatial Competition," Economica, London School of Economics and Political Science, vol. 55(220), pages 479-91, November.
  15. Schmitt, Nicolas, 1995. "Product Imitation, Product Differentiation and International Trade," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 36(3), pages 583-608, August.
  16. Krugman, Paul R., 1979. "Increasing returns, monopolistic competition, and international trade," Journal of International Economics, Elsevier, vol. 9(4), pages 469-479, November.
  17. Helpman, Elhanan, 1981. "International trade in the presence of product differentiation, economies of scale and monopolistic competition : A Chamberlin-Heckscher-Ohlin approach," Journal of International Economics, Elsevier, vol. 11(3), pages 305-340, August.
  18. Economides, Nicholas, 1986. "Minimal and maximal product differentiation in Hotelling's duopoly," Economics Letters, Elsevier, vol. 21(1), pages 67-71.
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