The Harrod-Balassa-Samuelson effect and endogenous extensive margins

Masashige Hamano

DEM Discussion Paper Series from Department of Economics at the University of Luxembourg

Abstract: In the last few decades, the world economy has witnessed the expansion of trade especially in the number of exchanged varieties, the so-called "extensive margins". In a theoretical model where extensive margins in both traded and non-traded sectors are endogenously determined, it is shown that the HBS effect is amplified. Following an HBS productivity shock, when countries expand their extensive margins rather than scale of production, wages appreciate further. Therefore, the expansion in extensive margins leads to a stronger appreciation in the price of non-traded goods. A panel regression across OECD countries indicates consistency with the theoretical model.

Keywords: The Harrod-Balassa-Samuelson effect; firm entry; real exchange rate; extensive margin (search for similar items in EconPapers)
JEL-codes: F12 F41 F43 (search for similar items in EconPapers)
Date: 2011
New Economics Papers: this item is included in nep-int and nep-opm
References: Add references at CitEc
Citations: View citations in EconPapers (2)

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Related works:
Journal Article: The Harrod–Balassa–Samuelson effect and endogenous extensive margins (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:luc:wpaper:11-21

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