Varieties and the terms of trade
This paper analyzes the dynamic adjustment of the terms of trade in an intertemporal, two country model with endogenous product variety. In the base model, all workers are identical. In an extended version, the development of new varieties requires skilled labor while manufacturing uses skilled and unskilled labor. In the model without skill, a population increase in one of the countries has no effect on its terms of trade, not even in the short run. In the model with skill, the terms of trade initially worsen, but eventually return to their original level. The terms of trade immediately and permanently worsen in response to a productivity increase in manufacturing. However, they gradually improve if the productivity in variety research rises. If productivity in both activities rises equiproportionally, the terms of trade respond in the same manner as after a population shock.
|Date of creation:||Jul 2009|
|Contact details of provider:|| Postal: Postbus 80510, 2508 GM Den Haag|
Phone: (070) 338 33 80
Fax: (070) 338 33 50
Web page: http://www.cpb.nl/
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Daron Acemoglu & Jaume Ventura, 2002.
"The World Income Distribution,"
The Quarterly Journal of Economics,
Oxford University Press, vol. 117(2), pages 659-694.
- Acemoglu, Daron & Ventura, Jaume, 2001. "The World Income Distribution," CEPR Discussion Papers 2973, C.E.P.R. Discussion Papers.
- Daron Acemoglu & Jaume Ventura, 2001. "The World Income Distribution," NBER Working Papers 8083, National Bureau of Economic Research, Inc.
- Gagnon Joseph E, 2008. "Growth-Led Exports: Implications for the Cross-Country Effects of Shocks to Potential Output," The B.E. Journal of Macroeconomics, De Gruyter, vol. 8(1), pages 1-30, January.
- Jérôme Vandenbussche & Philippe Aghion & Costas Meghir, 2004. "Growth, distance to frontier and composition of human capital," IFS Working Papers W04/31, Institute for Fiscal Studies.
- Vandenbussche, JÃ©rÃ´me & Aghion, Philippe & Meghir, Costas, 2006. "Growth, distance to frontier and composition of human capital," Scholarly Articles 12490648, Harvard University Department of Economics.
- Aghion, Philippe & Meghir, Costas & Vandenbussche, Jérôme, 2005. "Growth, Distance to Frontier and Composition of Human Capital," CEPR Discussion Papers 4860, C.E.P.R. Discussion Papers.
- Jérôme Vandenbussche & Philippe Aghion & Costas Meghir, 2006. "Growth, distance to frontier and composition of human capital," Journal of Economic Growth, Springer, vol. 11(2), pages 97-127, June.
- Lutz Arnold, 2007. "A generalized multi-country endogenous growth model," International Economics and Economic Policy, Springer, vol. 4(1), pages 61-100, April.
- Pietro Peretto & Sjak Smulders, 2002. "Technological Distance, Growth And Scale Effects," Economic Journal, Royal Economic Society, vol. 112(481), pages 603-624, July.
- Peretto, P. & Smulders, J.A., 2002. "Technological distance, growth and scale effects," Other publications TiSEM bdce08a7-4ad9-4427-a99e-f, Tilburg University, School of Economics and Management.
- Alwyn Young, 1998. "Growth without Scale Effects," Journal of Political Economy, University of Chicago Press, vol. 106(1), pages 41-63, February.
- Corsetti, Giancarlo & Martin, Philippe & Pesenti, Paolo, 2007. "Productivity, terms of trade and the `home market effect'," Journal of International Economics, Elsevier, vol. 73(1), pages 99-127, September.
- Giancarlo Corsetti & Philippe Martin & Paolo Pesenti, 2007. "Productivity, terms of trade and the 'home market effect'," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00176911, HAL.
- Henk Kranendonk & Johan Verbruggen, 2007. "SAFFIER; a multi-purpose model of the Dutch economy for short-term and medium-term analyses," CPB Document 144, CPB Netherlands Bureau for Economic Policy Analysis. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:cpb:discus:127. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.