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Pattern of Trade and Economic Development in the Model of Monopolistic Competition

Listed author(s):
  • Jeffrey D. Sachs
  • Xiaokai Yang
  • Dingsheng Zhang

The paper introduces differences in production and transaction conditions between countries into the model of monopolistic competition to investigate the interplay between trade policies and development strategies. It applies inframarginal analysis, which is total benefit analysis between corner solutions in addition to marginal analysis of each corner solution, to show that as transaction conditions are improved, the general equilibrium may discontinuously jump across different patterns of trade and economic development. It compares the marginal and inframarginal comparative statics of equilibrium in the model of monopolistic competition with the core theorems in the neoclassical trade models and with conventional wisdom in development economics. It shows that as analytical framework is altered, the meanings of concepts and related empirical observations will be changed too.

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File URL: http://www.cid.harvard.edu/cidwp/pdf/014.pdf
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Paper provided by Center for International Development at Harvard University in its series CID Working Papers with number 14.

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Date of creation: Apr 1999
Handle: RePEc:wop:cidhav:14
Contact details of provider: Postal:
Center for International Development at Harvard University (CID). 79 John F. Kennedy Street, Cambridge, MA 02138.

Phone: 617-495-4112
Fax: 617-496-8793Tertiary-Area:ecdev,intlecon
Web page: http://www.cid.harvard.edu/cidwp/
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  17. Sonnenschein, Hugo, 1973. "Do Walras' identity and continuity characterize the class of community excess demand functions?," Journal of Economic Theory, Elsevier, vol. 6(4), pages 345-354, August.
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  19. Balassa, Bela, 1989. "Outward orientation," Handbook of Development Economics,in: Hollis Chenery & T.N. Srinivasan (ed.), Handbook of Development Economics, edition 1, volume 2, chapter 31, pages 1645-1689 Elsevier.
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