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International Trade and Income Distribution

This paper applies the inframarginal analysis, which is a combination of marginal and total cost-benefit analysis, to investigate the relationship between division of labor, the extent of the market, productivity, and inequality of income distribution. The model with transaction costs and exogenous and endogenous comparative advantages shows that as transaction conditions are improved, the general equilibrium discontinuously jumps from autarky to partial division of labor with a dual structure, then to the complete division of labor where dual structure disappears. In this process different groups of individuals with different transaction conditions get involved in a certain level of division of labor at different stages of development.

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Paper provided by Chicago - Graduate School of Business in its series Papers with number 18.

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Length: 27 pages
Date of creation: 2000
Date of revision:
Handle: RePEc:fth:chicbu:18
Contact details of provider: Postal:
UNIVERSITY OF CHICAGO, H.G.B. ALEXANDER FOUNDATION GRADUATE SCHOOL OF BUSINESS, CHICAGO ILLINOIS 60637 U.S.A.

Web page: http://gsb.uchicago.edu/

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  1. Avinash Dixit, 1989. "Trade and Insurance with Adverse Selection," Review of Economic Studies, Oxford University Press, vol. 56(2), pages 235-247.
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  6. Stephen Nickell & D. Nicolitsas, 1994. "Wages," LSE Research Online Documents on Economics 51644, London School of Economics and Political Science, LSE Library.
  7. Young, Allyn A., 1928. "Increasing Returns and Economic Progress," History of Economic Thought Articles, McMaster University Archive for the History of Economic Thought, vol. 38, pages 527-542.
  8. Hongyi Li & Lyn Squire & Tao Zhang & Heng-fu Zou, 1999. "A Data Set on Income Distribution," CEMA Working Papers 575, China Economics and Management Academy, Central University of Finance and Economics.
  9. Yang, Xiaokai & Wang, Jiangou & Wills, Ian, 1992. "Economic growth, commercialization, and institutional changes in rural China, 1979-1987," China Economic Review, Elsevier, vol. 3(1), pages 1-37.
  10. Xiaokai Yang, 1994. "Endogenous vs. exogenous comparative advantage and economies of specialization vs. economies of scale," Journal of Economics, Springer, vol. 60(1), pages 29-54, February.
  11. Gary Burtless, 1995. "International Trade and the Rise in Earnings Inequality," Journal of Economic Literature, American Economic Association, vol. 33(2), pages 800-816, June.
  12. Gary S. Becker, 1981. "A Treatise on the Family," NBER Books, National Bureau of Economic Research, Inc, number beck81-1, October.
  13. Oded Galor & Joseph Zeira, 2013. "Income Distribution and Macroeconomics," Working Papers 2013-12, Brown University, Department of Economics.
  14. Alesina, Alberto F & Rodrik, Dani, 1991. "Distributive Politics and Economic Growth," CEPR Discussion Papers 565, C.E.P.R. Discussion Papers.
  15. Alberto Alesina & Dani Rodrik, 1994. "Distributive Politics and Economic Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 109(2), pages 465-490.
  16. Katz, L.F. & Murphy, K.M., 1991. "Changes in Relative Wages, 1963-1987: Supply and Demand Factors," Harvard Institute of Economic Research Working Papers 1580, Harvard - Institute of Economic Research.
  17. Din, Musleh-ud, 1996. "International Capital Mobility and Development Policy in a Dual Economy," Review of International Economics, Wiley Blackwell, vol. 4(2), pages 185-201, June.
  18. Greenwood, J. & Jovanovic, B., 1990. "Financial Development, Growth, And The Distribution Of Income," University of Western Ontario, The Centre for the Study of International Economic Relations Working Papers 9002, University of Western Ontario, The Centre for the Study of International Economic Relations.
  19. Banerjee, Abhijit V & Newman, Andrew F, 1993. "Occupational Choice and the Process of Development," Journal of Political Economy, University of Chicago Press, vol. 101(2), pages 274-98, April.
  20. Henry Thompson, 1995. "Free trade and income redistribution in some developing and newly industrialized countries," Open Economies Review, Springer, vol. 6(3), pages 265-280, July.
  21. Morgan Kelly, 1997. "The dynamics of Smithian growth," Open Access publications 10197/521, School of Economics, University College Dublin.
  22. Balassa, Bela, 1986. "The employment effects of trade in manufactured products between developed and developing countries," Journal of Policy Modeling, Elsevier, vol. 8(3), pages 371-390.
  23. George J. Borjas & Richard B. Friedman & Lawrence F. Katz, 1997. "How Much Do Immigration and Trade Affect Labor Market Outcomes?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 28(1), pages 1-90.
  24. Timothy Frye & Andrei Shleifer, 1996. "The Invisible Hand and the Grabbing Hand," NBER Working Papers 5856, National Bureau of Economic Research, Inc.
  25. Sun, Guang-Zhen & Yang, Xiaokai & Zhou, Lin, 2004. "General equilibria in large economies with endogenous structure of division of labor," Journal of Economic Behavior & Organization, Elsevier, vol. 55(2), pages 237-256, October.
  26. Klaus Deininger & Lyn Squire, 1996. "A New Data Set Measuring Income Inequality," CEMA Working Papers 512, China Economics and Management Academy, Central University of Finance and Economics.
  27. Kevin M. Murphy & Andrei Shleifer & Robert Vishny, 1988. "Income Distribution, Market Size, and Industrialization," NBER Working Papers 2709, National Bureau of Economic Research, Inc.
  28. Morgan Kelly, 1997. "The Dynamics of Smithian Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 112(3), pages 939-964.
  29. Khandker, A. Wahhab & Rashid, Salim, 1995. "Wage subsidy and full-employment in a dual economy with open unemployment and surplus labor," Journal of Development Economics, Elsevier, vol. 48(1), pages 205-223, October.
  30. Sen, Partha, 1998. "Terms of Trade and Welfare for a Developing Economy with an Imperfectly Competitive Sector," Review of Development Economics, Wiley Blackwell, vol. 2(1), pages 87-93, February.
  31. Rosen, Sherwin, 1983. "Specialization and Human Capital," Journal of Labor Economics, University of Chicago Press, vol. 1(1), pages 43-49, January.
  32. Yang, Xiaokai & Borland, Jeff, 1991. "A Microeconomic Mechanism for Economic Growth," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 460-82, June.
  33. Easton, Stephen T & Walker, Michael A, 1997. "Income, Growth, and Economic Freedom," American Economic Review, American Economic Association, vol. 87(2), pages 328-32, May.
  34. Jeffrey G. Williamson, 1998. "Globalization, Labor Markets and Policy Backlash in the Past," Journal of Economic Perspectives, American Economic Association, vol. 12(4), pages 51-72, Fall.
  35. Dixit, Avinash, 1987. "Trade and insurance with moral hazard," Journal of International Economics, Elsevier, vol. 23(3-4), pages 201-220, November.
  36. Baldwin, Richard E. & Venables, Anthony J., 1995. "Regional economic integration," Handbook of International Economics, in: G. M. Grossman & K. Rogoff (ed.), Handbook of International Economics, edition 1, volume 3, chapter 31, pages 1597-1644 Elsevier.
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