A Ricardian Model with a Continuum of Goods under Non-homothetic Preferences: Demand Complementarities, Income Distribution, and North-South Trade
This paper develops a Ricardian model with a continuum of goods when consumers have nonhomothetic preferences. Goods are indexed in terms of priority, and the households add higher-indexed goods to their consumption baskets, as they become richer. South (North) has comparative advantage in a lower (higher) spectrum of goods, hence specializing in goods with lower (higher) income elasticities of demand. Due to the income elasticity difference, a variety of exogenous changes have asymmetric effects on the terms of trade, patters of specialization, and welfare. Product cycles, accompanied by a southern terms of trade deterioration, occurs as a consequence of a faster population growth in South, a uniform productivity growth in South, as well as a global productivity improvements. South's domestic policy to redistribute income from the rich to the poor can improve its terms of trade so much that all the households in South may be better off, at the expense of North. Keywords: The Ricardian model, The Dornbusch-Fischer-Samuelson Model, The Flam-Helpman-Stokey Models, Technology and Trade, Population Growth and Trade, North-South Trade, Product Cycle, Nonhomothetic Preferences, Demand Complementarities, Immiserizing Growth, Transfer Paradox.
|Date of creation:||Mar 1999|
|Contact details of provider:|| Postal: Center for Mathematical Studies in Economics and Management Science, Northwestern University, 580 Jacobs Center, 2001 Sheridan Road, Evanston, IL 60208-2014|
Web page: http://www.kellogg.northwestern.edu/research/math/
More information through EDIRC
|Order Information:|| Email: |
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Bhagwati, Jagdish N & Brecher, Richard A & Hatta, Tatsuo, 1983. "The Generalized Theory of Transfers and Welfare: Bilateral Transfers in a Multilateral World," American Economic Review, American Economic Association, vol. 73(4), pages 606-618, September.
- Grossman, Gene M. & Helpman, Elhanan, 1995.
"Technology and trade,"
Handbook of International Economics,in: G. M. Grossman & K. Rogoff (ed.), Handbook of International Economics, edition 1, volume 3, chapter 25, pages 1279-1337
- Grossman, G.M. & Helpman, E., 1994. "Technology and Trade," Papers 175, Princeton, Woodrow Wilson School - Public and International Affairs.
- Grossman, Gene & Helpman, Elhanan, 1995. "Technology and Trade," CEPR Discussion Papers 1134, C.E.P.R. Discussion Papers.
- Gene M. Grossman & Elhanan Helpman, 1994. "Technology and Trade," NBER Working Papers 4926, National Bureau of Economic Research, Inc.
- Nancy L. Stokey, 1991. "The Volume and Composition of Trade Between Rich and Poor Countries," Review of Economic Studies, Oxford University Press, vol. 58(1), pages 63-80.
- G. M. Grossman & K. Rogoff (ed.), 1995. "Handbook of International Economics," Handbook of International Economics, Elsevier, edition 1, volume 3, number 3, January.
- Dornbusch, Rudiger & Fischer, Stanley & Samuelson, Paul A, 1977. "Comparative Advantage, Trade, and Payments in a Ricardian Model with a Continuum of Goods," American Economic Review, American Economic Association, vol. 67(5), pages 823-839, December.
- R. Dornbusch & S. Fischer & P. A. Samuelson, 1976. "Comparative Advantage, Trade and Payments in a Ricardian Model With a Continuum of Goods," Working papers 178, Massachusetts Institute of Technology (MIT), Department of Economics.
- Wilson, Charles A, 1980. "On the General Structure of Ricardian Models with a Continuum of Goods: Applications to Growth, Tariff Theory, and Technical Change," Econometrica, Econometric Society, vol. 48(7), pages 1675-1702, November.
- Raymond Vernon, 1966. "International Investment and International Trade in the Product Cycle," The Quarterly Journal of Economics, Oxford University Press, vol. 80(2), pages 190-207.
- Krugman, Paul, 1987. "The narrow moving band, the Dutch disease, and the competitive consequences of Mrs. Thatcher : Notes on trade in the presence of dynamic scale economies," Journal of Development Economics, Elsevier, vol. 27(1-2), pages 41-55, October.
- Hunter, Linda, 1991. "The contribution of nonhomothetic preferences to trade," Journal of International Economics, Elsevier, vol. 30(3-4), pages 345-358, May.
- Flam, Harry & Helpman, Elhanan, 1987. "Vertical Product Differentiation and North-South Trade," American Economic Review, American Economic Association, vol. 77(5), pages 810-822, December.
- Jagdish Bhagwati, 1958. "Immiserizing Growth: A Geometrical Note," Review of Economic Studies, Oxford University Press, vol. 25(3), pages 201-205. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:nwu:cmsems:1241. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Fran Walker)
If references are entirely missing, you can add them using this form.