The Role of Quality Ladders in a Ricardian Model of Trade with Nonhomothetic Preferences

Esteban Jaimovich () and Vincenzo Merella ()

No 09/01, City University Economics Discussion Papers from Department of Economics, City University, London

Abstract: The literature on North-South trade has explored conditions under which international trade might be a factor magnifying income disparities between the advanced North and the backward South. Little attention has yet been placed on the e¤ect of trade on countries that do not display substantial dissimilarities concerning capital endowments. We show that even when no single country is technologically more advanced than any other one and productivity changes are uniform and identical in all countries, international trade may still be a source of income divergence. Income divergence will be experienced when comparative advantages induce patterns of specialisation that, although optimal for each country at some initial point in time, do not o¤er the same scope for improvements in terms of subsequent quality upgrading of ?nal products

Keywords: International Trade; Quality Ladders; Nonhomothetic Preferences (search for similar items in EconPapers)
JEL-codes: F11 F43 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-int and nep-opm
Date: 2009-01
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Related works:
Working Paper: The Role of Quality Ladders in a Ricardian Model of Trade with Nonhomothetic Preferences (2008)
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Persistent link: http://EconPapers.repec.org/RePEc:cty:dpaper:0901

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