Trade Between Creative Regions When the Input Elasticity of Substitution is Less Than Unity

Amitrajeet Batabyal and Hamid Beladi

MPRA Paper from University Library of Munich, Germany

Abstract: We analyze a model of trade between J heterogeneous regions that are creative in the sense of Richard Florida. There are two non-traded final goods that are used for consumption and investment. There is a continuum of inputs that are freely traded between the creative regions. There is no borrowing or lending between the creative regions. Specifically, we study the impacts of free trade in inputs when the elasticity of substitution between the traded inputs that are used to produce the final consumption and investment goods is less than unity. We first show that creative regions that have lower discount rates will be relatively poor and hence worse off with trade when the above elasticity of substitution is less than one. Next, we explain in detail why this negative result obtains.

Keywords: Creative Capital; Creative Region; Elasticity of Substitution; Input; Trade (search for similar items in EconPapers)
JEL-codes: F12 R11 (search for similar items in EconPapers)
Date: 2016-01-09
New Economics Papers: this item is included in nep-int
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Citations: View citations in EconPapers (2)

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Related works:
Journal Article: TRADE BETWEEN CREATIVE REGIONS WHEN THE INPUT ELASTICITY OF SUBSTITUTION IS LESS THAN UNITY (2016)
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