Trade and Development in a Labor Surplus Economy

Edward B. Barbier () and Michael Rauscher ()

No 53, Thuenen-Series of Applied Economic Theory from University of Rostock, Institute of Economics, Germany

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.

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)
New Economics Papers: this item is included in nep-agr, nep-int and nep-upt
Date: 2005
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http://www.wiwi.uni-rostock.de/fileadmin/Institute ... pdf/wp053thuenen.pdf First version, 2005 (application/pdf)

Related works:
Working Paper: Trade and Development in a Labor Surplus Economy (2005)
Journal Article: Trade and Development in a Labor Surplus Economy (2007)
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Persistent link: http://EconPapers.repec.org/RePEc:ros:wpaper:53

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