A BEJEAP Topics article.

Abstract

This paper looks at a model in which two countries trade agricultural and manufactured commodities. The manufactured-goods sector produces with increasing returns to scale under conditions of monopolistic competition. It is shown that an increase in land endowment (or an increase in agricultural productivity) can have negative welfare implications for both countries. This outcome can result under three different scenarios: asymmetries across countries, i.e. a North-South model, a neoclassical labor market instead of a Lewisian market in the home country, and alternative utility functions.

Submitted: September 6, 2006 · Accepted: July 26, 2007 · Published: August 30, 2007

Recommended Citation

Barbier, Edward B. and Rauscher, Michael (2007) "Trade and Development in a Labor Surplus Economy," The B.E. Journal of Economic Analysis & Policy: Vol. 7 : Iss. 1 (Topics), Article 45.
DOI: 10.2202/1935-1682.1665
Available at: http://www.bepress.com/bejeap/vol7/iss1/art45