Trade and Development in a Labor Surplus Economy

Edward B. Barbier () and Michael Rauscher
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Michael Rauscher: Rostock University

The B.E. Journal of Economic Analysis & Policy, 2007, vol. 7, issue 1

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 instead of a Lewisian market in the home country, and alternative utility functions.

Keywords: international trade; labor surplus economy; land expansion; monopolistic competition; North-South model (search for similar items in EconPapers)
JEL-codes: F12 J61 O15 O18 (search for similar items in EconPapers)
Date: 2007

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Related works:
Working Paper: Trade and Development in a Labor Surplus Economy (2005)
Working Paper: Trade and Development in a Labor Surplus Economy (2005)
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Persistent link: http://EconPapers.repec.org/RePEc:bpj:bejeap:v:7:y:2007:i:1:n:45

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