Title:

Pattern of Trade and Economic Development in the Model of Monopolistic Competition

Author(s):

Sachs, Jeffrey D.
Yang, Xiaokai
Zhang, Dingsheng

Date:

1999

Type:

Working papers

Department:

Earth Institute

Permanent URL:

http://hdl.handle.net/10022/AC:P:8168

Part Number:

14

Publisher:

Center for International Development at Harvard University

Publisher Location:

Cambridge, Mass.

Abstract:

The paper introduces differences in production and transaction conditions between countries into the model of monopolistic competition to investigate the interplay between trade policies and development strategies. It applies inframarginal analysis, which is total benefit analysis between corner solutions in addition to marginal analysis of each corner solution, to show that as transaction conditions are improved, the general equilibrium may discontinuously jump across different patterns of trade and economic development. It compares the marginal and inframarginal comparative statics of equilibrium in the model of monopolistic competition with the core theorems in the neoclassical trade models and with conventional wisdom in development economics. It shows that as analytical framework is altered, the meanings of concepts and related empirical observations will be changed too.

Subject(s):

Economics, Commerce-Business
Economic theory

Item views:

128

Metadata:

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