Agricultural Productivity, Business Services, and Comparative Advantage

Toru Kikuchi

Open Economies Review, 2004, vol. 15, issue 4, 375-383

Abstract: By explicitly incorporating both the intermediate business service sector and non-homothetic preferences, this study develops a two-good (the agricultural good and the manufactured good) model of trade that captures the role of agricultural productivity, which deepens the division of labor in the manufactured good sector. The level of agricultural productivity is found to determine the structure of comparative advantage: the country that has an absolute advantage in the agricultural sector also has a comparative advantage in the manufactured good sector.

Date: 2004
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