Why Might a Country Want to Develop its Comparative Disadvantage Industries?
This paper develops a general equilibrium 2x2 Ricardian model that demonstrates the possibility of immiserizing growth as a result of a productivity improvement in a country's export industry. The model also shows that immiserizing growth can be avoided by improving the productivity of the country's comparative disadvantage industry. However this strategy may inflict harm on its trading partner. In comparison, a balanced growth strategy can improve welfare of the growing country without hurting its trading partner.
|Date of creation:||01 Sep 2005|
|Date of revision:|
|Contact details of provider:|| Postal: Department of Economics, Monash University, Victoria 3800, Australia|
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- Melvin, James R, 1969. "Demand Conditions and Immiserizing Growth," American Economic Review, American Economic Association, vol. 59(4), pages 604-06, Part I Se.
- Jagdish N. Bhagwati, 1968. "Distortions and Immiserizing Growth: a Generalization," Review of Economic Studies, Oxford University Press, vol. 35(4), pages 481-485.
- Bhagwati, Jagdish N, 1969. "Optimal Policies and Immiserizing Growth," American Economic Review, American Economic Association, vol. 59(5), pages 967-70, December.
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