Per capita income demand for variety, and international trade: Linder reconsidered

Paolo Ramezzana

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: We analyse a monopolistically competitive model of international trade where goods must be consumed in indivisible amounts. The number of varieties that enter a consumer''s optimal consumption bundle is increasing in the consumer''s per capita income. We first show that, for a given level of GDP, less populous and richer economies have a larger equilibrium number of product varieties. We then show that in an integrated world, even when total GDP is kept constant in all markets, as the levels of and the similarity in the trading partners'' per capita incomes increase, so do the number of varieties exchanged and the volume of bilateral trade flows, as conjectured in the Linder hypothesis. Implications for the distribution of gains from trade between and within countries are also discussed.

Keywords: Per capita income; product variety; international trade (search for similar items in EconPapers)
JEL-codes: L81 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2000-06
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

Downloads: (external link)
http://eprints.lse.ac.uk/20184/ Open access version. (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:20184

Access Statistics for this paper

More papers in LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library LSE Library Portugal Street London, WC2A 2HD, U.K.. Contact information at EDIRC.
Bibliographic data for series maintained by LSERO Manager ().