The role of quality ladders in a Ricardian model of trade with nonhomothetic preference
The literature on North-South trade has explored conditions under which international trade might be a factor magnifying income disparities between the advanced North and the backward South. Little attention has yet been placed on the effect of trade on countries that do not display substantial dissimilarities concerning capital endowments. We show that even when no single country is technologically more advanced than any other one and productivity changes are uniform and identical in all countries, international trade may still be a source of income divergence. Income divergence will be experienced when comparative advantages induce patterns of specialisation that, although optimal for each country at some initial point in time, do not o¤er the same scope for improvements in terms of subsequent quality upgrading of final products.
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- Gene M. Grossman & Elhanan Helpman, 1991.
"Quality Ladders and Product Cycles,"
The Quarterly Journal of Economics,
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- Gene M. Grossman & Elhanan Helpman, 1989. "Quality Ladders and Product Cycles," NBER Working Papers 3201, National Bureau of Economic Research, Inc.
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- Kiminori Matsuyama, 2000. "A Ricardian Model with a Continuum of Goods under Nonhomothetic Preferences: Demand Complementarities, Income Distribution, and North-South Trade," Journal of Political Economy, University of Chicago Press, vol. 108(6), pages 1093-1120, December.
- Kiminori Matsuyama, 1999. "A Ricardian Model with a Continuum of Goods under Non-homothetic Preferences: Demand Complementarities, Income Distribution, and North-South Trade," Discussion Papers 1241, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
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- Nancy L. Stokey, 1991. "The Volume and Composition of Trade Between Rich and Poor Countries," Review of Economic Studies, Oxford University Press, vol. 58(1), pages 63-80. Full references (including those not matched with items on IDEAS)
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