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Trade and development in a labor surplus economy

Author

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  • Barbier, Edward B.
  • Rauscher, Michael

Abstract

This paper looks at a model in which two countries trade agricultural and manufactured commodities. The manufactured-goods sector produces with increasing returns to scale under conditions of monopolistic competition. It is shown that an increase in land endowment (or an increase in agricultural productivity) can have negative welfare implications for both countries. This outcome can result under three different scenarios: asymmetries across countries, i.e. a North-South model, a neoclassical labor market in the home country's instead of a Lewisian market, and alternative utility functions.

Suggested Citation

  • Barbier, Edward B. & Rauscher, Michael, 2005. "Trade and development in a labor surplus economy," Thuenen-Series of Applied Economic Theory 53, University of Rostock, Institute of Economics.
  • Handle: RePEc:zbw:roswps:53
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    References listed on IDEAS

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    1. Taylor, Alan M & Williamson, Jeffrey G, 1994. "Capital Flows to the New World as an Intergenerational Transfer," Journal of Political Economy, University of Chicago Press, vol. 102(2), pages 348-371, April.
    2. Krugman, Paul, 1980. "Scale Economies, Product Differentiation, and the Pattern of Trade," American Economic Review, American Economic Association, pages 950-959.
    3. repec:hoo:wpaper:e-92-3 is not listed on IDEAS
    4. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, pages 297-308.
    5. Matsuyama, Kiminori, 1992. "Agricultural productivity, comparative advantage, and economic growth," Journal of Economic Theory, Elsevier, vol. 58(2), pages 317-334, December.
    6. Findlay, Ronald, 1980. "The Terms of Trade and Equilibrium Growth in the World Economy," American Economic Review, American Economic Association, pages 291-299.
    7. Findlay, Ronald, 1992. "The Roots of Divergence: Western Economic History in Comparative Perspective," American Economic Review, American Economic Association, pages 158-161.
    8. Richard Baldwin & Rikard Forslid & Philippe Martin & Gianmarco Ottaviano & Frederic Robert-Nicoud, 2005. "Economic Geography and Public Policy," Economics Books, Princeton University Press, edition 1, number 7524.
    9. Krugman, Paul, 1981. "Trade, accumulation, and uneven development," Journal of Development Economics, Elsevier, pages 149-161.
    10. Krugman, Paul R., 1979. "Increasing returns, monopolistic competition, and international trade," Journal of International Economics, Elsevier, pages 469-479.
    11. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, pages 297-308.
    12. Burgstaller, A. & Saavedra-Rivano, N., 1984. "Capital mobility and growth in a North-South model," Journal of Development Economics, Elsevier, pages 213-237.
    13. Joseph Francois & Hans Van Meijl & Frank Van Tongeren, 2005. "Trade liberalization in the Doha Development Round," Economic Policy, CEPR;CES;MSH, vol. 20(42), pages 349-391, April.
    14. Edward B. Barbier, 2005. "Frontier Expansion and Economic Development," Contemporary Economic Policy, Western Economic Association International, vol. 23(2), pages 286-303, April.
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    Citations

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    Cited by:

    1. Rauscher, Michael & Barbier, Edward B., 2010. "Biodiversity and geography," Resource and Energy Economics, Elsevier, vol. 32(2), pages 241-260, April.
    2. Martin Gonzalez Eiras & Dirk Niepelt, 2004. "Sustaining Social Security," Working Papers 72, Universidad de San Andres, Departamento de Economia, revised Jun 2004.

    More about this item

    Keywords

    international trade; labor surplus economy; land expansion; monopolistic competition; North-South model;

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure

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