Trade, Non-Scale Growth, and Uneven Development

This paper investigates the relationship between trade and economic development using a two-country, non-scale-growth model. Depending on the share of the expenditure for manufactured goods, we obtain two different results with regard to long-run production patterns. If the share of the expenditure is less than or equal to half, the leader country diversifies while the follower country asymptotically specializes in agriculture completely. If, on the other hand, the share of the expenditure is more than half, the leader country completely specializes in manufacturing while the follower country asymptotically specializes in agriculture completely. Whether or not the follower country can catch up with the leader country in the long run depends on two factors: (1) the patterns of production in both countries and (2) the measure of economic welfare that is used, that is, per capita income or per capita consumption.