A Ricardian model wuth a continuum of goods under nonhomothethic preferences: Demand complementaries, income distributiondistribution, and North-South trade

K. Matsuyama*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

93 Scopus citations

Abstract

This paper develops a Ricardian model of trade in which goods are indexed according to priority and higher-indexed goods are consumed only by richer households. South (North) has a comparative advantage in lower- (higher-) indexed goods and, hence, specializes in goods with lower (higher) income elasticities of demand. Product cycles and a southern terms-of-trade deterioration result from faster population growth and uniform productivity growth in South and a global productivity improvement. South's domestic income redistribution policy can improve its terms of trade so much that every household in South may be better off, at the expense of North.

Original languageEnglish (US)
Pages (from-to)1093-1120
Number of pages28
JournalJournal of Political Economy
Volume108
Issue number6
DOIs
StatePublished - 2000

ASJC Scopus subject areas

  • Economics and Econometrics

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