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Trade Between Similar Countries: The Role of Credit Market Imperfection

Marjit, Sugata (2012): Trade Between Similar Countries: The Role of Credit Market Imperfection.

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Abstract

We build up a simple Ricardian trade model with imperfection in the market for credit which affects the pattern of production. Workers/entrepreneurs are endowed with different levels “capital” and need to borrow to produce the credit intensive good. We argue that in such a framework identical countries will gain from trade without the assumption of comparative advantage.

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