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Country Size, Specialization Patterns and Secular Demand Stagnation

Yoshiyasu Ono

No 6752, CESifo Working Paper Series from CESifo Group Munich

Abstract: Using a dynamic two-country two-commodity Ricardian model where preference for money (or wealth) leads to aggregate demand deficiency, this paper examines the relationship between the two countries’ relative population size and their specialization patterns, employment and consumption. When the countries have similar population sizes, they specialize in respective commodities with comparative advantage. In this case a larger foreign, or a smaller home, population raises the relative price of the home commodity. It raises home real income and consumption per capita if full employment prevails in the home country. If unemployment appears, however, home employment and consumption per capita decrease.

Keywords: secular demand stagnation; liquidity trap; unemployment; population; specialization pattern (search for similar items in EconPapers)
JEL-codes: F41 E24 E32 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mac
Date: 2017
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