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Productivity, Demand and the Home Market Effect

Listed author(s):
  • Giraldo, Iader

    ()

  • Jaramillo, Fernando

    ()

The causality between international trade and industrialization is still ambiguous. We consider a model of international trade with the Home Market Effect - with differences in income and productivity between sectors and between countries - in order to identify additional channels for determining the effects of international trade on industrialization. Introducing non-homothetic preferences and differences in productivity aids in the interpretation of any apparent paradoxes within international trade, such as the commercial relations between more populated countries like China and India and large economies such as the U.S. Population size, demand composition and productivity levels constitute the three main channels for determining the effects of international trade. Interactions among these channels define the results obtained in terms of industrialization, while welfare levels are always higher in relation to autarky.

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File URL: http://repository.urosario.edu.co/bitstream/id/72290/dt186.pdf1.pdf
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Paper provided by UNIVERSIDAD DEL ROSARIO in its series DOCUMENTOS DE TRABAJO with number 014447.

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Length: 36
Date of creation: 15 Apr 2016
Handle: RePEc:col:000092:014447
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  1. Devashish Mitra & Vitor Trindade, 2005. "Inequality and trade," Canadian Journal of Economics, Canadian Economics Association, vol. 38(4), pages 1253-1271, November.
  2. Krugman, Paul, 1991. "Increasing Returns and Economic Geography," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 483-499, June.
  3. Desdoigts, Alain & Jaramillo, Fernando, 2009. "Trade, demand spillovers, and industrialization: The emerging global middle class in perspective," Journal of International Economics, Elsevier, vol. 79(2), pages 248-258, November.
  4. Martin, Philippe & I.P. Ottaviano, Gianmarco, 1999. "Growing locations: Industry location in a model of endogenous growth," European Economic Review, Elsevier, vol. 43(2), pages 281-302, February.
  5. Zhihao Yu, 2005. "Trade, market size, and industrial structure: revisiting the home-market effect," Canadian Journal of Economics, Canadian Economics Association, vol. 38(1), pages 255-272, February.
  6. Melitz, Marc J., 2005. "When and how should infant industries be protected?," Journal of International Economics, Elsevier, vol. 66(1), pages 177-196, May.
  7. Markusen, James R, 1986. "Explaining the Volume of Trade: An Eclectic Approach," American Economic Review, American Economic Association, vol. 76(5), pages 1002-1011, December.
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