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Research Institute of Industrial Economics (IFN) Working Paper Series

No 488:
Trade, Southern Integration, and Uneven Development

Georgi Trofimov

Abstract: The paper demonstrates how trade between developing countries can cause the divergence of long-run growth among these countries. The model describes two symmetric countries trading with each other and the industrial rest of the world. Bilateral trade occurs at any moment if the countries have different numbers of intermediate varieties. The country with a larger number produces more manufactured goods than the other country does. In the bilateral trade the advanced country exports manufactures and imports basic goods and can develop the comparative advantage over the other country. The model demonstrates that Southern integration leads to uneven development paths if there is a high complementarity between intermediate inputs.

Keywords: Trade; Intermediate inputs; Multiple equilibria; (follow links to similar papers)

JEL-Codes: F15; F43; (follow links to similar papers)

32 pages, August 1, 1997

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