Specialization and Welfare in the Presence of Imperfectly Integrated Capital Markets and Learning-by-Doing
Journal
Open Economies Review
ISSN
0923-7992
ISSN-Digital
1573-708X
Type
journal article
Date Issued
2008-07-01
Author(s)
Abstract
We study a two-sector, two-period model with learning externalities in the modern sector and imperfectly integrated capital markets. We find that higher capital market integration lowers the requirements on the learning pattern necessary for free trade to lead to an equilibrium with maximal specialization in modern sector activities. We further find that the equilibrium with maximal specialization in modern sector activities Pareto dominates, if it exists, any other free trade equilibrium, and that autarky can Pareto dominate free trade if capital markets are poorly integrated, even when there is maximal specialization in modern sector activities under free trade.
Language
English
HSG Classification
contribution to scientific community
Refereed
Yes
Publisher
Springer Science + Business Media B.V
Publisher place
Dordrecht
Volume
19
Number
3
Start page
391
End page
402
Pages
12
Subject(s)
Eprints ID
234956