North-South Trade and Uneven Development in a Classical Conventional Wage Share Growth Model

Sasaki, Hiroaki (2018): North-South Trade and Uneven Development in a Classical Conventional Wage Share Growth Model.

Abstract

This study presents a model of North-South trade and uneven development, and investigates the growth rates of both countries under the trade pattern such that the North specializes in investment goods while the South specializes in consumption goods. In contrast to existing studies, we close the model by fixing each countries' income distribution, specifically, the ratio of labor share to capital share. Using the model, we conduct the following two analyses. First, assuming that both countries already engage in international trade and that the North specializes in investment goods while the South specializes in consumption goods, we investigate the dynamics of both countries' growth rates and the terms of trade. Second, we investigate the condition under which such a trade pattern holds, and compare equilibrium variables under autarky and equilibrium values under free trade. From the first analysis, it follows that both countries grow at the same rate in the long run. From the second analysis, however, it follows that in the first place, the terms of trade must lie within the interval between the relative prices of both countries and that both countries' growth rates may not equalize as long as both countries engage in trade.

• Item Type: MPRA Paper
• Language: English
• Keywords: North-South trade; Uneven development; Conventional wage share; Comparative advantage
• Subjects: F - International Economics > F1 - Trade > F10 - General; F - International Economics > F4 - Macroeconomic Aspects of International Trade and Finance > F43 - Economic Growth of Open Economies; O - Economic Development, Innovation, Technological Change, and Growth > O3 - Innovation ; Research and Development ; Technological Change ; Intellectual Property Rights > O33 - Technological Change: Choices and Consequences ; Diffusion Processes; O - Economic Development, Innovation, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity > O41 - One, Two, and Multisector Growth Models

References

Blecker, R. A. (1996) ``The New Economic Integration: Structuralist Models of North-South Trade and Investment Liberalization,'' Structural Change and Economic Dynamics 7, pp. 321-345.

Chui, K., P. Levine, S. M. Murshed, and J. Pearlman (2001) ``North-South Models of Growth and Trade,'' Journal of Economic Surveys 16, pp. 123-165.

Conway, P. J. and W. A. Darity (1991) ``Growth and Trade with Asymmetric Returns to Scale: A Model for Nicholas Kaldor,'' Southern Economic Journal 57 (3), pp. 745-759.

Darity, W. A. (1990) ``The Fundamental Determinants of the Terms of Trade Reconsidered: Long-Run and Long-Period Equilibrium,'' American Economic Review 80 (4), pp. 816-827.

Dutt, A. K. (1988) ``Inelastic Demand for Southern Goods, International Demonstration Effects, and Uneven Development,'' Journal of Development Economics 29, pp. 111-122.

Dutt, A. K. (1996) ``Southern Primary Exports, Technological Change and Uneven Development,'' Cambridge Journal of Economics 20, pp. 73-89.

Dutt, A. K. (2002) ``Thirlwall's Law and Uneven Development,'' Journal of Post Keynesian Economics 24 (3), pp. 367-390.

Findlay, R. (1980) ``The Terms of Trade and Equilibrium Growth in the World Economy,'' American Economic Review 70 (3), pp. 291-299.

Foley, D. K. and T. R. Michl (1999) Growth and Distribution, Harvard University Press, Cambridge, Massachusetts.

Ho, P.-S. (1997) ``Technological Gap and Uneven Accumulation in a Classical Production Model,'' Metroeconomica 48 (1), pp. 81-106.

Mainwaring, L. (1974) ``A Neo-Ricardian Analysis of International Trade,'' Kyklos 24, pp. 537-553.

Molana, H. and D. Vines (1989) ``North-South Growth and the Terms of Trade: A Model on Kaldorian Lines,'' Economic Journal 99, pp. 443-453.

Sarkar, A. (1989) ``A Keynesian Model of North-South Trade,'' Journal of Development Economics 30, pp. 179-188.

Sarkar, P. (1997) ``Growth and Terms of Trade: A North-South Macroeconomic Framework,'' Journal of Macroeconomics 19 (1), pp. 117-133.

Sarkar, P. (2001) ``Technical Progress and the North-South Terms of Trade,'' Review of Development Economics 5 (3), pp. 433-443.

Sasaki, H. (2008) ``Rate of Profit and Disproportionate Productivity Growth under a Constant Profit Share,'' Evolutionary and Institutional Economics Review 4 (2), pp. 301-312.

Sasaki, H. (2011a) ``Population Growth and North-South Uneven Development,'' Oxford Economic Papers 63, pp. 307-330.

Sasaki, H. (2011b) ``Trade, Non-Scale Growth and Uneven Development,'' Metroeconomica 62 (4), pp. 691-711.

Sasaki, H. (2017) ``Population Growth and Trade Patterns in Semi-Endogenous Growth Economies,'' Structural Change and Economic Dynamics 41, pp. 1-12.

Taylor, L. (1981) ``South-North Trade and Southern Growth,'' Journal of International Economics 11, pp. 589-602.

Uni, H. (1996) ``Disproportional Productivity Growth and Accumulation Regime,'' Paper prepared for the International Symposium Japanese Capitalism and Contemporary Crisis Paris, 16-18 December 1996.