Why Might a Country Want to Develop its Comparative Disadvantage Industries?

Wenli Cheng and Dingsheng Zhang

No 15/05, Monash Economics Working Papers from Monash University, Department of Economics

Abstract: This paper develops a general equilibrium 2x2 Ricardian model that demonstrates the possibility of immiserizing growth as a result of a productivity improvement in a country's export industry. The model also shows that immiserizing growth can be avoided by improving the productivity of the country's comparative disadvantage industry. However this strategy may inflict harm on its trading partner. In comparison, a balanced growth strategy can improve welfare of the growing country without hurting its trading partner.

Keywords: 2x2 Ricardian model; immiserizing growth; balanced growth (search for similar items in EconPapers)
JEL-codes: F10 F11 (search for similar items in EconPapers)
Pages: 15 pages
Date: 2005-09-01
New Economics Papers: this item is included in nep-cse
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