Working Paper Series
Trade, Southern Integration, and Uneven Development
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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