Commercial Policy and Dynamic Adjustment Under Monopolistic Competition
Journal
Journal of International Economics
ISSN
0022-1996
Type
journal article
Date Issued
1996-05-01
Author(s)
Abstract
We explore liberalization of trade in differentiated commodities using a model featuring monopolistic competition and capital accumulation. We identify a mechanism of ‘cumulative causation' in investment and an associated externality leading to under-accumulation. We provide long-run analytical results for a stylized core model and offer a quantitative treatment of transitional and sectoral issues using a disaggregate computational model. The aggregate welfare gains from unilateral liberalization are about three times larger than in the competitive case with constant returns, and they exhibit a characteristic pattern of generational incidence. Small export subsidies may be self-financing.
Language
English
Keywords
Trade liberalization
CGE modeling
monopolistic competition
investment multiplier
overlapping generations
net foreign assets.
HSG Classification
not classified
Refereed
No
Publisher
Elsevier
Publisher place
North-Holland
Volume
40
Number
3-4
Start page
373
End page
409
Pages
37
Subject(s)
Eprints ID
21975