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Geography, non-homotheticity, and industrialization: A quantitative analysis

Breinlich, Holger and Cuñat, Alejandro (2013) Geography, non-homotheticity, and industrialization: A quantitative analysis Journal of Development Economics, 103. pp. 133-153.

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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.

Item Type: Article
Divisions : Faculty of Arts and Social Sciences > School of Economics
Authors :
Cuñat, Alejandro
Date : 18 January 2013
DOI : 10.1016/j.jdeveco.2013.01.005
Uncontrolled Keywords : Industrialization; Economic geography; International trade
Depositing User : Clive Harris
Date Deposited : 24 May 2018 10:52
Last Modified : 16 Jan 2019 19:10

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