Breinlich, Holger and Cuñat, Alejandro (2012) Geography, Non-Homotheticity, and Industrialization: A Quantitative Analysis. Working Paper. CeFiG Working Papers 19.
Breinlich, Holger and Cuñat, Alejandro (2012) Geography, Non-Homotheticity, and Industrialization: A Quantitative Analysis. Working Paper. CeFiG Working Papers 19.
Breinlich, Holger and Cuñat, Alejandro (2012) Geography, Non-Homotheticity, and Industrialization: A Quantitative Analysis. Working Paper. CeFiG Working Papers 19.
Abstract
We propose a quantitative framework for the analysis of industrialization in which specialization in manufacturing or agriculture is driven by comparative advantage and non-homothetic preferences. Countries are integrated through trade but trade is not costless and geographic position matters. We use a number of analytical examples and a multi-country calibration to explain two important empirical regularities: (i) there is a strong positive correlation between proximity to large markets and levels of manufacturing activity; (ii) there is a positive correlation between the ratio of agricultural to manufacturing productivity and shares of manufacturing in GDP. Our calibrated model replicates these facts and also provides a better fit to cross-sectional data on manufacturing shares than frameworks which ignore the role of trade costs or non-homotheticity. We use the calibrated model to quantitatively analyze the effect of increases in agricultural productivity and a further lowering of trade barriers.
Item Type: | Monograph (Working Paper) |
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Subjects: | H Social Sciences > HB Economic Theory |
Divisions: | Faculty of Social Sciences > Economics, Department of |
Depositing User: | Jim Jamieson |
Date Deposited: | 06 Mar 2013 15:27 |
Last Modified: | 06 Mar 2013 15:27 |
URI: | http://repository.essex.ac.uk/id/eprint/5749 |