Monopolistic competition models have frequently been applied in macroeconomics, growth and development, and international and interregional economics. The three features of monopolistic competition, the monopoly power of producers, the lack of strategic interaction, and endogenous product variety, make it a useful framework to examine the aggregate implications of imperfect competition, increasing returns and incomplete markets. This papers presents a highly selective review in this area, with special emphasis on complementarity and its role in generating multiplier processes, business cycles, clustering, underdevelopment traps, regional disparities, and sustainable growth, or more generally, what Myrdal (1957) called the principle of circular and cumulative causation. (This abstract was borrowed from another version of this item.)

In contrast to domestic trade, international trade inherently requires more intensive use of skilled labour with expertise in areas such as international business, language skills, and maritime insurance, and the transoceanic transportation is more capital intensive than the local transportation. In the presence of such bias in factor demands, globalization caused by an improvement in the export technologies can lead to a worldwide increase in the relative prices of the factors used intensively in international trade. Furthermore, a worldwide increase in the factors used intensively in international trade can lead to globalization. To capture these effects, we develop a flexible approach to model costly international trade, which includes the standard iceberg approach as a special case. More specifically, we extend the Ricardian model of trade with a continuum of goods by introducing multiple factors of production and by making technologies of supplying goods depend on whether the destination is home or abroad. If the technologies of supplying the same good to the two destinations differ only in total factor productivity, the model becomes isomorphic to the Ricardian model with the iceberg cost. By allowing the two technologies to differ in the factor intensities, our approach enables us to examine the links between factor endowments, factor prices, and globalization that cannot be captured by the iceberg approach.

Despite the significance of limited labor mobility across sectors, few attempts have been made to produce dynamic models of sectoral adjustment that are consistent with perfect foresight and, yet, flexible enough to allow for a variety of dynamic experiments. This paper proposes a simple perfect-foresight model of two-sector economies in which aggregate sectoral movement of labor takes place through the process of demographic change. The model is tractable enough that one can easily examine the effects of intertemporally complicated relative price shocks (both exogenous and endogenous) under a variety of assumptions on technology.

This paper examines the effects of terms-of-trade changes on the external adjustment of a small open economy where each consumer has a life-cycle saving function. The supply side of the economy is given by the standard two-sector model with two primary factors: labour and capital. It is shown that, when both commodities are produced, a terms-of-trade deterioration leads to a current account deficit (surplus) if the export (import) sector is more labour intensive. 1.

This paper asks whether adjustment processes over real time help to "select" the long-run outcome in a model of industrialization, where multiple stationary states exist because of increasing returns in the manufacturing sector. "History" alone cannot in general determine where the economy will end up. Self-fulfilling expectations often make the escape from the state of preindustrialization (the takeoff) possible. The global bifurcation technique is used to determine when an underdevelopment trap exists and when a takeoff path exists. The role of government policy and agricultural productivity in industrialization are then considered.

Journal Article Export Subsidies as an Outcome of the Management-Labor Conspiracy Get access Kiminori Matsuyama Kiminori Matsuyama Northwestern University Search for other works by this author on: Oxford Academic Google Scholar The Quarterly Journal of Economics, Volume 105, Issue 3, August 1990, Pages 803–813, https://doi.org/10.2307/2937900 Published: 01 August 1990

Endogenous demand composition across sectors due to income elasticity differences, or Engel's Law for brevity, affects (i) sectoral compositions in employment and in value‐added, (ii) variations in innovation rates and in productivity change across sectors, (iii) intersectoral patterns of trade across countries, and (iv) product cycles from rich to poor countries. Using a two‐country model of directed technical change with a continuum of sectors under nonhomothetic preferences, which is rich enough to capture all these effects as well as their interactions, this paper offers a unifying perspective on how economic growth and globalization affect the patterns of structural change, innovation, and trade across countries and across sectors in the presence of Engel's Law. Among the main messages is that globalization amplifies, instead of reducing, the power of endogenous domestic demand composition differences as a driver of structural change.

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.

This paper investigates the effects of financial market globalization on the inequality of nations. The world economy consists of inherently identical countries, which differ only in their levels of capital stock. Each country is represented by the standard overlapping generations model, modified only to incorporate credit market imperfection. An integration of financial markets affects the set of stable steady states, as it changes the balance between the equalizing force of the diminishing returns technology and the unequalizing force of the wealth-dependent borrowing constraint. The model is tractable enough to allow for a complete characterization of the stable steady states. In the absence of the international financial market, the world economy has a unique steady state, which is symmetric and stable. In the presence of the international financial market, symmetry-breaking occurs under some conditions. That is, the symmetric steady state loses its stability and stable asymmetric steady states come to exist. In the stable asymmetric steady states, the world economy is endogenously divided into the rich and poor countries; the borrowing constraints are binding in the poor but not in the rich; the world output is smaller, the rich are richer and the poor are poorer in any of the stable asymmetric steady states than in the (unstable) symmetric steady state.

The neoclassical growth model focuses on factor accumulation as an engine of growth, while the neo-Schumpetarian growth model stresses innovation. This paper argues that these two views of growth may capture different phases of a single growth experience. In the model presented below, the balanced growth path is unstable and the economy achieves sustainable growth through cycles under an empirically plausible condition, perpetually moving back and forth between two phases. One phase is characterized by higher output growth, higher investment, no innovation, and a competitive market structure. The other phase is characterized by lower output growth, lower investment, high innovation, and a more monopolistic market structure. Both investment and innovation are essential in sustaining growth indefinitely, and yet they move in an asynchronized way; only one of them appears to play a dominant role in each phase. The economy grows faster along the cycles than along the Zunstable. balanced growth path.