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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. Abhijit V. Banerjee & Andrew F. Newman, 1990. "Occupational Choice and the Process of Development," Discussion Papers 911, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
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  8. 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.
  9. 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.
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  11. Galor, Oded & Zeira, Joseph, 1988. "Income Distribution and Macroeconomics," MPRA Paper 51644, University Library of Munich, Germany, revised 01 Sep 1989.
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  14. Grossman, Gene M & Helpman, Elhanan, 1990. "Comparative Advantage and Long-run Growth," American Economic Review, American Economic Association, vol. 80(4), pages 796-815, September.
  15. Rosen, Sherwin, 1983. "Specialization and Human Capital," Journal of Labor Economics, University of Chicago Press, vol. 1(1), pages 43-49, January.
  16. Stephen Nickell & D Nicolitsas, 1994. "Wages," CEP Discussion Papers dp0219, Centre for Economic Performance, LSE.
  17. Fujita, Masahisa & Krugman, Paul, 1995. "When is the economy monocentric?: von Thunen and Chamberlin unified," Regional Science and Urban Economics, Elsevier, vol. 25(4), pages 505-528, August.
  18. 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.
  19. Paul Krugman, 1995. "Technology, Trade, and Factor Prices," NBER Working Papers 5355, National Bureau of Economic Research, Inc.
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  24. 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.
  25. Gary S. Becker, 1981. "A Treatise on the Family," NBER Books, National Bureau of Economic Research, Inc, number beck81-1, November.
  26. 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.
  27. 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.
  28. Murphy, Kevin M & Shleifer, Andrei & Vishny, Robert W, 1989. "Income Distribution, Market Size, and Industrialization," The Quarterly Journal of Economics, MIT Press, vol. 104(3), pages 537-64, August.
  29. 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.
  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. Dixit, Avinash K, 1989. "Trade and Insurance with Adverse Selection," Review of Economic Studies, Wiley Blackwell, vol. 56(2), pages 235-47, April.
  32. Alesina, Alberto F & Rodrik, Dani, 1991. "Distributive Politics and Economic Growth," CEPR Discussion Papers 565, C.E.P.R. Discussion Papers.
  33. 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.
  34. 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.
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