Quality Ladders in a Ricardian Model of Trade with Nonhomothetic Preferences

Esteban Jaimovich and Vincenzo Merella

DEGIT Conference Papers from DEGIT, Dynamics, Economic Growth, and International Trade

Abstract: The literature on North-South trade has explored conditions under which international trade might magnify income disparities between the advanced North and the backward South. Little attention has yet been placed on the effect of trade on countries that do not display substantial dissimilarities concerning aggregate 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 when nonhomothetic preferences and quality ladders are jointly taken into account. 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 offer the same scope for improvements in terms of subsequent quality upgrading of final products.

Keywords: International Trade; Nonhomothetic Preferences; Quality Ladders (search for similar items in EconPapers)
Pages: 42 pages JEL Classification: F11, F43
Date: 2010-09
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: QUALITY LADDERS IN A RICARDIAN MODEL OF TRADE WITH NONHOMOTHETIC PREFERENCES (2012)
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