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

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Listed:
  • Jeffrey D. Sachs
  • Xiaokai Yang
  • Dingsheng Zhang

Abstract

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.

Suggested Citation

  • Jeffrey D. Sachs & Xiaokai Yang & Dingsheng Zhang, 1999. "Pattern of Trade and Economic Development in the Model of Monopolistic Competition," CID Working Papers 14, Center for International Development at Harvard University.
    • Handle: RePEc:wop:cidhav:14
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    File URL: http://www.cid.harvard.edu/cidwp/pdf/014.pdf
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Cheng, Wenli & Yang, Xiaokai, 2004. "Inframarginal analysis of division of labor: A survey," Journal of Economic Behavior & Organization, Elsevier, vol. 55(2), pages 137-174, October.
    2. Fan, C. Simon, 2004. "Quality, trade, and growth," Journal of Economic Behavior & Organization, Elsevier, vol. 55(2), pages 271-291, October.

    More about this item

    Keywords

    trade pattern; development strategy; income distribution; terms of 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
    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General

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