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Monopolistic Competition and North-South Trade



We examine the consequences of opening to international trade for a developing economy with open urban unemployment and rural-urban migration, where the urban sector is monopolistically competitive. We show that there exists a threshold level of urbanization prior to which increases in product variety will be reflected in increased urban unemployment, that opening to intra-industry trade with a high-wage economy (i.e., North-South trade) will reduce the rate of urban unemployment by a greater amount than intra-industry trade with a similar economy, and that trade intervention in the South may lower welfare by reducing varieties produced in the North.

Suggested Citation

  • Reza Oladi & John Gilbert, 2011. "Monopolistic Competition and North-South Trade," Working Papers 201101, Utah State University, Department of Economics and Finance.
  • Handle: RePEc:uth:wpaper:201101

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    Cited by:

    1. Beladi Hamid & Chakrabarti Avik & Marjit Sugata, 2015. "On Cross-Border Mergers and Product Differentiation," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 15(1), pages 1-15, January.
    2. Batabyal, Amitrajeet & Nijkamp, Peter, 2019. "The Magnification of a Lagging Region's Initial Economic Disadvantages on the Balanced Growth Path," MPRA Paper 93486, University Library of Munich, Germany, revised 09 Mar 2019.
    3. Hamid Beladi & Avik Chakrabarti & Sugata Marjit, 2013. "A Mixed GOLE Model of Cross-Border Mergers and Trade," Working Papers 0143eco, College of Business, University of Texas at San Antonio.
    4. repec:eee:reveco:v:59:y:2019:i:c:p:500-509 is not listed on IDEAS
    5. John Gilbert & Hamid Beladi & Reza Oladi, 2015. "North–South Trade Liberalization and Economic Welfare," Review of Development Economics, Wiley Blackwell, vol. 19(4), pages 1006-1017, November.
    6. John Gilbert & Hamid Beladi & Reza Oladi, 2014. "On North-South Intra- and Inter-Industry Trade and Welfare," Working Papers 0139eco, College of Business, University of Texas at San Antonio.
    7. repec:bla:ecorec:v:94:y:2018:i:306:p:276-300 is not listed on IDEAS
    8. repec:eee:reveco:v:58:y:2018:i:c:p:699-707 is not listed on IDEAS
    9. Reza Oladi & John Gilbert, 2015. "International Narcotics Trade, Foreign Aid, And Enforcement," Economic Inquiry, Western Economic Association International, vol. 53(3), pages 1630-1646, July.
    10. Batabyal, Amitrajeet & Beladi, Hamid, 2018. "Preference Matching, Income, and Population Distribution in Urban and Adjacent Rural Regions," MPRA Paper 92308, University Library of Munich, Germany, revised 18 Dec 2018.
    11. Ko, Chia Chiun & Frijters, Paul, 2014. "When Banana Import Restrictions Lead to Exports: A Tale of Cyclones and Quarantine Policies," IZA Discussion Papers 7988, Institute of Labor Economics (IZA).
    12. Beladi, Hamid & Chao, Chi-Chur & Hollas, Daniel, 2013. "How growing asset inequality affects developing economies," Journal of Economics and Business, Elsevier, vol. 68(C), pages 43-51.
    13. Hamid Beladi & Avik Chakrabarti & Sugata Marjit, 2015. "Cross-border Mergers and Privatization," Working Papers 0147eco, College of Business, University of Texas at San Antonio.

    More about this item


    Trade and monopolistic competition; Urban unemployment; North-South trade;

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure


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