In this paper, we merge the heterogenous firm model of Melitz (2003) with the Ricardian model of Dornbusch, Fisher and Samuelson (DFS 1977) to explain how the pattern of international specialization and trade is determined by the interaction of comparative advantage, economies of scale, country sizes and trade barriers. The model is able to capture the existence of inter-industry trade and intr...

Henry Wan, Jr. and Yinggang Zhou Cornell University May 2005 Abstract A general equilibrium model is set up for the entire trading world with overlapping generations, where the initial sector-specific age distribution of labor makes the impact of trade liberalization beneficial for some and detrimental to others, while allocation efficiency is improved. Und...

Division of labor models have become a standard analytical tool, along with competitive general equilibrium models (Ricardian, HOS, Ricardo-Viner), in public finance, trade, growth, development, and macroeconomics. Yet unlike the earlier models, specialization models lack a canonical representation. This is because they are both new and complex, characterized by multiple equilibria, instability...

A dynamic model with credit under limited commitment is constructed, in which limited memory can weaken the effects of punishment for default. This creates an endogenous role for government debt in credit markets, and the economy can be non-Ricardian. Default can occur in equilibrium, and government debt essentially plays a role as collateral and thus improves borrowers’ incentives. The provisi...

By developing a Ricardian trade model that features technology transfer via foreign direct investment (FDI), we show that technology transfer via multinational enterprises (MNEs) increases world output and trade in goods and services. When there are many goods a continuous reduction in the cost of technology transfer will cause increasingly more technologically advanced goods to go through the ...

This paper proposes a theory of the fiscal foundations of inflation based on imperfect knowledge and learning. The theory is similar in spirit to, but distinct from, unpleasant monetarist arithmetic and the fiscal theory of the price level. Because the assumption of imperfect knowledge breaks Ricardian equivalence, details of fiscal policy, such as the average scale and composition of the publi...

This study employed a Ricardian model that captures farmers’ adaptation to analyze the impact of climate change on South African Sugarcane production under irrigation and dryland conditions. The study utilized time series data for the period 1977 to 1998 pooled over 11 districts. Results showed that climate change has significant nonlinear impacts on net revenue per hectare of sugarcane in Sout...

The purpose of this paper is to sketch out what are the consequences of free technology transfer, licensing and foreign direct investment (F.D.I) on the North-South welfare in a two-good, two-country Ricardian model. On the demand side and following the recent reappearance of the homotheticity restriction on consumers preferences, we use a Cobb-Douglas utility function. We show how that the dev...