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Trade and Entrepreneurship with Heterogeneous Workers

Author

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  • Thisse, Jacques-François
  • Tabuchi, Takatoshi
  • Oyama, Daisuke

Abstract

This paper investigates the impacts of progressive trade openness, technological externalities, and heterogeneity of individuals on the formation of entrepreneurship in a two-country occupation choice model. We show that trade opening gives rise to a non-monotonic process of international specialization, in which the share of entrepreneurial firms in the large (small) country first increases (decreases) and then decreases (increases), with the global economy exhibiting first de-industrialization and then re-industrialization. When countries have the same size, we also show that strong technological externalities make the symmetric equilibrium unstable, generating equilibrium multiplicity, while sufficient heterogeneity of individuals leads to the stability and uniqueness of the symmetric equilibrium.

Suggested Citation

  • Thisse, Jacques-François & Tabuchi, Takatoshi & Oyama, Daisuke, 2007. "Trade and Entrepreneurship with Heterogeneous Workers," CEPR Discussion Papers 6567, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:6567
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    Cited by:

    1. is not listed on IDEAS
    2. Zeng, Dao-Zhi & Uchikawa, Tomohiro, 2014. "Ubiquitous inequality: The home market effect in a multicountry space," Journal of Mathematical Economics, Elsevier, vol. 50(C), pages 225-233.
    3. Tarek Ben Ali, 2023. "How Does Institutional Quality Affect Business Start-Up in High and Middle-Income Countries? An International Comparative Study," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 14(3), pages 2830-2877, September.
    4. Pokrovsky Dmitry & Behrens Kristian & Zhelobodko Evgeny, 2014. "Market Size, Entrepreneurship, and Income Inequality," EERC Working Paper Series 14/01e, EERC Research Network, Russia and CIS.
    5. Daisuke Oyama & Yasuhiro Sato & Takatoshi Tabuchi & Jacques‐François Thisse, 2011. "On the impact of trade on the industrial structures of nations," International Journal of Economic Theory, The International Society for Economic Theory, vol. 7(1), pages 93-109, March.
    6. Xi Yang, 2014. "Special Issue: Issues in Asia. Guest Editor: Laixun Zhao," Review of Development Economics, Wiley Blackwell, vol. 18(2), pages 313-325, May.
    7. Adolfo Cristóbal Campoamor, 2019. "Gradual trade liberalization in a North–South model of the product cycle," Journal of Economics, Springer, vol. 127(3), pages 265-292, August.
    8. José M. Gaspar, 2018. "A prospective review on New Economic Geography," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 61(2), pages 237-272, September.

    More about this item

    Keywords

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    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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