A many-country model of industrialization

Breinlich, Holger and Cunat, Alejandro (2011) A many-country model of industrialization. CEP Discussion Papers (CEPDP1082). London School of Economics and Political Science. Centre for Economic Performance, London, UK.

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Abstract

We draw attention to the role of economic geography in explaining important cross-sectional facts which are difficult to account for in existing models of industrialization. By construction, closed-economy models that stress the role of local demand in generating sufficient expenditure on manufacturing goods are not suited to explain the strong and negative correlation between distance to the world’s main markets and levels of manufacturing activity in the developing world. Secondly, open-economy models that emphasize the importance of comparative advantage are at odds with a positive correlation between the ratio of agricultural to manufacturing productivity and shares of manufacturing in GDP. This paper provides a potential explanation for these puzzles by nesting the above theories in a multi-location model with trade costs. Using a number of simple analytical examples and a full-scale multi-country calibration, we show that the model can replicate the above stylized facts.

Item Type:	Monograph (Discussion Paper)
Official URL:	https://cep.lse.ac.uk/_new/publications/discussion...
Additional Information:	© 2011 The Author(s)
Divisions:	Centre for Economic Performance
Subjects:	H Social Sciences > HC Economic History and Conditions H Social Sciences > HD Industries. Land use. Labor
JEL classification:	F - International Economics > F1 - Trade > F11 - Neoclassical Models of Trade F - International Economics > F1 - Trade > F12 - Models of Trade with Imperfect Competition and Scale Economies F - International Economics > F1 - Trade > F14 - Country and Industry Studies of Trade O - Economic Development, Technological Change, and Growth > O1 - Economic Development > O14 - Industrialization; Manufacturing and Service Industries; Choice of Technology
Date Deposited:	26 Feb 2024 11:54
Last Modified:	14 Sep 2024 04:44
URI:	http://eprints.lse.ac.uk/id/eprint/121743

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