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Capital and Goods Market Integration and the Inequality of Nations

Author

Listed:
  • Wagner, Martin

    (Institute for Advanced Studies, Vienna)

Abstract

A 2-country model with two groups of agents, workers and capitalists is presented in which economic integration results in an initial phase of catch-up, where the less industrialised country experiences the rise in both capital and labour income. Then, after a certain level of integration has been reached, the less industrialised country is completely de-industrialised. This has detrimental effects on the income of this country's workers, but the capital owners of this country gain from specialisation, as do the workers in the industrialised country. Both the capital and the goods markets are subject to imperfections. The structure of the equilibrium sets during integration is characterised completely.

Suggested Citation

  • Wagner, Martin, 1999. "Capital and Goods Market Integration and the Inequality of Nations," Economics Series 66, Institute for Advanced Studies.
  • Handle: RePEc:ihs:ihsesp:66
    as

    Download full text from publisher

    File URL: http://www.ihs.ac.at/publications/eco/es-66.pdf
    File Function: First version, 1999
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    References listed on IDEAS

    as
    1. Krugman, Paul & Venables, Anthony J., 1996. "Integration, specialization, and adjustment," European Economic Review, Elsevier, vol. 40(3-5), pages 959-967, April.
    2. Paul Krugman & Anthony J. Venables, 1995. "Globalization and the Inequality of Nations," The Quarterly Journal of Economics, Oxford University Press, vol. 110(4), pages 857-880.
    3. David Hummels & James Levinsohn, 1995. "Monopolistic Competition and International Trade: Reconsidering the Evidence," The Quarterly Journal of Economics, Oxford University Press, vol. 110(3), pages 799-836.
    4. Krugman, Paul, 1980. "Scale Economies, Product Differentiation, and the Pattern of Trade," American Economic Review, American Economic Association, vol. 70(5), pages 950-959, December.
    5. repec:hhs:iuiwop:430 is not listed on IDEAS
    6. Ethier, Wilfred J, 1982. "National and International Returns to Scale in the Modern Theory of International Trade," American Economic Review, American Economic Association, vol. 72(3), pages 389-405, June.
    7. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Globalisation; Trade; Market Imperfections; Integration;

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F15 - International Economics - - Trade - - - Economic Integration

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