The Dynamics of National Specialization

IGIER Working Paper No.156

26 Pages Posted: 22 Dec 1999

See all articles by Giovanni Peri

Giovanni Peri

University of California, Davis - Department of Economics

Date Written: September 1999

Abstract

I explore the dynamics of national production in a two-sector, two country model with cross-sector mobility and forward-looking agents, when trade costs fall or when the news of a boom in a sector is learned. Using the phase diagram method, introduced by Baldwin 1999 in this type of applications, I discover some important and interesting features of the equilibria and of their stability properties, which would have been completely overlooked by the "simple" static model as in Fujita et al.1999. In particular I find out that, lacking comparative advantage, specialization may not take place at all labor market rigidities are too high, while the existence of comparative advantage ensures full specialization for intermediate values of the trade cost even in the presence of high labor market rigidities.

JEL Classification: R0, F1, J6

Suggested Citation

Peri, Giovanni, The Dynamics of National Specialization (September 1999). IGIER Working Paper No.156. Available at SSRN: https://ssrn.com/abstract=194108 or http://dx.doi.org/10.2139/ssrn.194108

Giovanni Peri (Contact Author)

University of California, Davis - Department of Economics ( email )

One Shields Drive
Davis, CA 95616-8578
United States
530-752-3033 (Phone)
530-752-9382 (Fax)

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