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First Mover Advantages, Blockaded Entry, And the Economics of Uneven Development

  • James R. Markusen

A two-sector, two-period trade model is developed in which one sector has increasing returns based on the creation of specialized intermediate inputs. One of the two (otherwise identical) countries is not able to enter the increasing returns sector in the first period through some "accident of history". A theoretical and numerical analysis solves for parameter regimes under which firms in the disadvantaged country are or are not able to enter the increasing returns sector in the second period. The welfare consequences of the two alternative second period outcomes are compared to one another and to an equilibrium with both countries entering in the first period. The disadvantaged country may fall further behind in the second period even when its firms are able to enter.

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File URL: http://www.nber.org/papers/w3284.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 3284.

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Date of creation: Mar 1990
Date of revision:
Publication status: published as International Trade and Trade Policy, MIT Press: Cambridge, 1991, pp.613-62 4
Handle: RePEc:nbr:nberwo:3284
Note: ITI IFM
Contact details of provider: Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
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Web page: http://www.nber.org
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  1. 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.
  2. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
  3. Kiyotaki, Nobuhiro, 1988. "Multiple Expectational Equilibria under Monopolistic Competition," The Quarterly Journal of Economics, MIT Press, vol. 103(4), pages 695-713, November.
  4. Gene M. Grossman & Elhanan Helpman, 1989. "Endogenous Product Cycles," NBER Working Papers 2913, National Bureau of Economic Research, Inc.
  5. Krugman, Paul, 1981. "Trade, accumulation, and uneven development," Journal of Development Economics, Elsevier, vol. 8(2), pages 149-161, April.
  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. Markusen, James R, 1989. "Trade in Producer Services and in Other Specialized Intermediate Inputs," American Economic Review, American Economic Association, vol. 79(1), pages 85-95, March.
  8. James R. Markusen, 1988. "Production, Trade, and Migration with Differentiated, Skilled Workers," Canadian Journal of Economics, Canadian Economics Association, vol. 21(3), pages 492-506, August.
  9. Markusen, James R., 1990. "Derationalizing tariffs with specialized intermediate inputs and differentiated final goods," Journal of International Economics, Elsevier, vol. 28(3-4), pages 375-383, May.
  10. Ignatius J. Horstmann & James R. Markusen, 1990. "Endogenous Market Structures in International Trade," NBER Working Papers 3283, National Bureau of Economic Research, Inc.
  11. Romer, Paul M, 1987. "Growth Based on Increasing Returns Due to Specialization," American Economic Review, American Economic Association, vol. 77(2), pages 56-62, May.
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