A Ricardian Model with a Continuum of Goods under Non-homothetic Preferences: Demand Complementarities, Income Distribution, and North-South Trade

Arbeitspapier

This paper develops a Ricardian model with a continuum of goods when consumers have nonhomothetic preferences. Goods are indexed in terms of priority, and the households add higher-indexed goods to their consumption baskets, as they become richer. South (North) has comparative advantage in a lower (higher) spectrum of goods, hence specializing in goods with lower (higher) income elasticities of demand. Due to the income elasticity difference, a variety of exogenous changes have asymmetric effects on the terms of trade, patters of specialization, and welfare. Product cycles, accompanied by a southern terms of trade deterioration, occurs as a consequence of a faster population growth in South, a uniform productivity growth in South, as well as a global productivity improvements. South's domestic policy to redistribute income from the rich to the poor can improve its terms of trade so much that all the households in South may be better off, at the expense of North. Keywords: The Ricardian model, The Dornbusch-Fischer-Samuelson Model, The Flam-Helpman-Stokey Models, Technology and Trade, Population Growth and Trade, North-South Trade, Product Cycle, Nonhomothetic Preferences, Demand Complementarities, Immiserizing Growth, Transfer Paradox.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Discussion Paper ; No. 1241

Classification and Topics

• Classification: Wirtschaft ; Neoclassical Models of Trade ; Macroeconomic Analyses of Economic Development

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Matsuyama, Kiminori
• Event: Veröffentlichung
• (who): Northwestern University, Kellogg School of Management, Center for Mathematical Studies in Economics and Management Science
• (where): Evanston, IL
• (when): 1999

Further information

• Handle: http://hdl.handle.net/10419/221597
• Last update: 10.03.2025, 11:42 AM CET