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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- Amit Khandelwal, 2009.
"The Long and Short (of) Quality Ladders,"
NBER Working Papers
15178, National Bureau of Economic Research, Inc.
- Kiminori Matsuyama, 2000.
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- 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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American Economic Review,
American Economic Association, vol. 67(5), pages 823-39, December.
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- Hallak, Juan Carlos, 2006. "Product quality and the direction of trade," Journal of International Economics, Elsevier, vol. 68(1), pages 238-265, January.
- Gene M. Grossman & Elhanan Helpman, 1991. "Quality Ladders and Product Cycles," The Quarterly Journal of Economics, Oxford University Press, vol. 106(2), pages 557-586.
- 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.
- repec:oup:qjecon:v:119:y:2004:i:2:p:646-677 is not listed on IDEAS
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