Geography, non-homotheticity, and industrialization: A quantitative analysisHolger Breinlich and Alejandro Cunat Journal of Development Economics, 2013, vol. 103, issue C, 133-153 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. Keywords: Industrialization; Economic geography; International trade (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:deveco:v:103:y:2013:i:c:p:133-153 DOI: 10.1016/j.jdeveco.2013.01.005 Access Statistics for this article Journal of Development Economics is currently edited by M. R. Rosenzweig More articles in Journal of Development Economics from Elsevier |
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