Endogenous Ranking and Equilibrium Lorenz Curve Across (ex ante) Identical Countries

Kiminori Matsuyama*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

10 Scopus citations

Abstract

This paper proposes a symmetry-breaking model of trade with a (large but) finite number of (ex ante) identical countries and a continuum of tradeable goods, which differ in their dependence on local differentiated producer services. Productivity differences across countries arise endogenously through free entry to the local service sector in each country. In any stable equilibrium, the countries sort themselves into specializing in different sets of tradeable goods, and a strict ranking of countries in per capita income, TFP, and the capital-labor ratio emerges endogenously. Furthermore, the distribution of country shares, the Lorenz curve, is unique and analytically solvable in the limit, as the number of countries grows unbounded. Using this limit as an approximation allows us to study what determines the shape of distribution, to perform various comparative statics, and to evaluate the welfare effects of trade.

Original languageEnglish (US)
Pages (from-to)2009-2031
Number of pages23
JournalEconometrica
Volume81
Issue number5
DOIs
StatePublished - Sep 2013

Keywords

  • Endogenous comparative advantage
  • Endogenous dispersion
  • Globalization and inequality
  • Log-submodularity
  • Lorenz-dominant shifts
  • Symmetry-breaking

ASJC Scopus subject areas

  • Economics and Econometrics

Fingerprint

Dive into the research topics of 'Endogenous Ranking and Equilibrium Lorenz Curve Across (ex ante) Identical Countries'. Together they form a unique fingerprint.

Cite this