The Harrod–Balassa–Samuelson effect and endogenous extensive margins

Masashige Hamano

Journal of the Japanese and International Economies, 2014, vol. 31, issue C, 98-113

Abstract: In the last few decades, the world economy has witnessed the expansion of trade, especially in the number of exchanged varieties, the so-called “extensive margins”. In a theoretical model where extensive margins in both tradable and non-tradable sectors are endogenously determined, it is shown that the Harrod–Balassa–Samuelson (HBS) effect is amplified. Following an HBS productivity shock, when countries expand their extensive margins rather than the scale of production, wages appreciate further. Therefore, the expansion in extensive margins leads to a stronger appreciation in the price of non-traded goods. Furthermore, when traded and non-traded goods are complements, the number of firms in the non-traded sector increases despite the appreciation of non-traded goods prices.

Keywords: Firm entry; Real exchange rate; Extensive margin; Harrod–Balassa–Samuelson (search for similar items in EconPapers)
JEL-codes: F12 F41 F43 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Working Paper: The Harrod-Balassa-Samuelson effect and endogenous extensive margins (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jjieco:v:31:y:2014:i:c:p:98-113

DOI: 10.1016/j.jjie.2012.06.004

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