Falling Behind and Catching Up in a Model of North-South Trade

Durkin, John T,

Review of International Economics, 1996, vol. 4, issue 2, 218-33

Abstract: This paper analyzes a formal, dynamic model of the center-periphery problem. The model features falling relative demand for agricultural goods, a higher rate of technical change in manufacturing, and a quality-differentiated manufactured good. Income differences imply a potential for intra-industry trade, while technical change generates product cycle type results. The main insight is that a closing of the North-South technology gap does not necessarily imply catching up, because of the falling relative demand for agricultural goods. The South catches up only if it exports lower-quality varieties of the manufactured good and closes the technology gap. Copyright 1996 by Blackwell Publishing Ltd.

Date: 1996
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