A Model of Trade and Growth with a Non-traded Service Sector

Yingfeng Xu

Canadian Journal of Economics, 1993, vol. 26, issue 4, 948-60

Abstract: This paper incorporates a nontraded service sector into an otherwise neoclassical model of trade and growth. The author's model can explain why the relative price of services, the expenditure share of services, and the employment share of the service sector all tend to rise with the level of per capita income, which is determined, in the long run, by the ratio of the saving rate to the rate of labor growth and the level of labor-augmenting technical progress. The author also finds that a rich country with a high level of technical progress, ceteris paribus, has comparative advantage in producing capital-intensive goods.

Date: 1993
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