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A New Ricardian Model of Trade, Growth and Inequality

Author

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  • Sugata Marjit

    (Indian Institute of Foreign Trade, Kolkata, India)

Abstract

The classical Wage Fund (Capital or Credit) framework is integrated with the simplest text-book version of the Ricardian model of comparative advantage, generating a model that replicates important features of the neo-classical production theory involving capital and labour without neo-classical assumptions. Interestingly the growth story of the model seems to be observationally equivalent to the Solow (1956) model of steady state growth. It can easily and effectively reflect on critical contemporary issues without the ammunitions of a more complex neo-classical system. Trade pampers inequality all across the globe independent of trade patterns. It is likely to increase growth rate but that rate declines over time. Technological progress without physical capital accumulation magnifies inequality in or out of steady state, generating a Picketty (2013) like situation. Financial crisis in terms of credit shortage hurts workers but benefits capitalists etc.

Suggested Citation

  • Sugata Marjit, 2020. "A New Ricardian Model of Trade, Growth and Inequality," Working Papers 2048, Indian Institute of Foreign Trade.
    • Handle: RePEc:ift:wpaper:2048
    as

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    References listed on IDEAS

    as
    1. Robert M. Solow, 1956. "A Contribution to the Theory of Economic Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 70(1), pages 65-94.
    2. Findlay, Ronald, 1984. "Growth and development in trade models," Handbook of International Economics, in: R. W. Jones & P. B. Kenen (ed.), Handbook of International Economics, edition 1, volume 1, chapter 4, pages 185-236, Elsevier.
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    More about this item

    JEL classification:

    • F1 - International Economics - - Trade
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
    • B4 - Schools of Economic Thought and Methodology - - Economic Methodology

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