Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/64837
Authors: 
Breinlich, Holger
Cuñat, Alejandro
Year of Publication: 
2012
Series/Report no.: 
CESifo Working Paper: Trade Policy 3927
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 cor-relation 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 ana-lyze the effect of increases in agricultural productivity and a further lowering of trade barriers.
Subjects: 
industrialization
economic geography
international trade
JEL: 
F11
F12
F14
O14
Document Type: 
Working Paper

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