A multi‐country, multi‐commodity Ricardian trade model with link commodities and Keynesian unemployment

Hideo Sato

Metroeconomica, 2022, vol. 73, issue 2, 441-465

Abstract: This study constructs a multi‐country, multi‐commodity Ricardian trade model with link commodities, defined as commodities commonly produced in more than one country, and Keynesian unemployment arising from deficient effective demand. Given production techniques, available labour, and demand in each country, the model determines patterns of international division of labour, commodity prices, wage rates, outputs, and employment in each country. The main results indicate that demand changes effectuate quantity adjustments without price changes, each country must expand domestic demand to increase domestic employment, and each country must raise the labour productivity of link commodities to increase relative domestic wage rates.

Date: 2022
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