Trade and Development in a Labor Surplus Economy

38 Pages Posted: 21 Jul 2005

See all articles by Edward B. Barbier

Edward B. Barbier

Colorado State University, Fort Collins - Department of Economics

Michael Rauscher

University of Rostock - Department of Economics; University of Rostock - Faculty of Business Administration, Economics and Social Sciences; CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Multiple version iconThere are 2 versions of this paper

Date Written: June 2005

Abstract

This paper looks at a model in which two countries trade agricultural and manufactured commodities. The manufactured-goods sector produces with increasing returns to scale under conditions of monopolistic competition. It is shown that an increase in land endowment (or an increase in agricultural productivity) can have negative welfare implications for both countries. This outcome can result under three different scenarios: asymmetries across countries, i.e. a North-South model, a neoclassical labor market in the home country's instead of a Lewisian market, and alternative utility functions.

Keywords: international trade, labor surplus economy, land expansion, monopolistic competition, North-South model

JEL Classification: F12, J61, O15, O18

Suggested Citation

Barbier, Edward B. and Rauscher, Michael, Trade and Development in a Labor Surplus Economy (June 2005). CESifo Working Paper Series No. 1481. Available at SSRN: https://ssrn.com/abstract=757704

Edward B. Barbier

Colorado State University, Fort Collins - Department of Economics ( email )

Fort Collins, CO 80523-1771
United States

Michael Rauscher (Contact Author)

University of Rostock - Department of Economics ( email )

Ulmenstr. 69
Rostock, 18057
Germany

HOME PAGE: http://www.wiwi.uni-rostock.de/vwl

University of Rostock - Faculty of Business Administration, Economics and Social Sciences ( email )

Ulmenstr. 69
Rostock, 18057
Germany

CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Poschinger Str. 5
Munich, DE-81679
Germany

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