Comparative advantage and strategic specialization
This paper shows that a strong comparative advantage is necessary for free trade and specialization in a 2 × 2 symmetric Ricardian model to be achieved in a Nash equilibrium. Governments strategically control labor distribution across industries, and representative agents maximize Cobb–Douglas utili...
Saved in:
Main Author: | |
---|---|
Other Authors: | |
Format: | Article |
Language: | English |
Published: |
2019
|
Subjects: | |
Online Access: | https://hdl.handle.net/10356/105738 http://hdl.handle.net/10220/48741 http://dx.doi.org/10.1111/roie.12300 |
Tags: |
Add Tag
No Tags, Be the first to tag this record!
|
Institution: | Nanyang Technological University |
Language: | English |
id |
sg-ntu-dr.10356-105738 |
---|---|
record_format |
dspace |
spelling |
sg-ntu-dr.10356-1057382019-12-10T14:47:43Z Comparative advantage and strategic specialization Kang, Minwook School of Social Sciences Nash Equilibrium DRNTU::Social sciences::Economic theory::International trade Cobb–Douglas This paper shows that a strong comparative advantage is necessary for free trade and specialization in a 2 × 2 symmetric Ricardian model to be achieved in a Nash equilibrium. Governments strategically control labor distribution across industries, and representative agents maximize Cobb–Douglas utilities. A Nash equilibrium with complete specialization is achieved if and only if relative productivity exceeds a key value of 3, which is considered a very large number based on previous empirical studies. This paper also introduces a two‐stage game where each government chooses labor distribution first and then tariffs. In this two‐stage game, complete specialization is never achieved for any relative productivity level. Finally, by generalizing the Cobb–Douglas model into constant elasticity of substitution (CES) preferences, I show that if immiserizing growth effects exist, complete specialization could not be achieved for any level of relative productivity. Accepted version 2019-06-13T09:13:52Z 2019-12-06T21:56:57Z 2019-06-13T09:13:52Z 2019-12-06T21:56:57Z 2017 Journal Article Kang, M. (2017). Comparative advantage and strategic specialization. Review of International Economics, 26(1), 1-19. doi:10.1111/roie.12300 0965-7576 https://hdl.handle.net/10356/105738 http://hdl.handle.net/10220/48741 http://dx.doi.org/10.1111/roie.12300 en Review of International Economics © 2017 John Wiley & Sons Ltd. This is the peer reviewed version of the following article: Kang, M. (2018). Comparative advantage and strategic specialization. Review of International Economics, 26(1), 1-19. doi:10.1111/roie.12300, which has been published in final form at http://dx.doi.org/10.1111/roie.12300. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Use of Self-Archived Versions. 32 p. application/pdf |
institution |
Nanyang Technological University |
building |
NTU Library |
country |
Singapore |
collection |
DR-NTU |
language |
English |
topic |
Nash Equilibrium DRNTU::Social sciences::Economic theory::International trade Cobb–Douglas |
spellingShingle |
Nash Equilibrium DRNTU::Social sciences::Economic theory::International trade Cobb–Douglas Kang, Minwook Comparative advantage and strategic specialization |
description |
This paper shows that a strong comparative advantage is necessary for free trade and specialization in a 2 × 2 symmetric Ricardian model to be achieved in a Nash equilibrium. Governments strategically control labor distribution across industries, and representative agents maximize Cobb–Douglas utilities. A Nash equilibrium with complete specialization is achieved if and only if relative productivity exceeds a key value of 3, which is considered a very large number based on previous empirical studies. This paper also introduces a two‐stage game where each government chooses labor distribution first and then tariffs. In this two‐stage game, complete specialization is never achieved for any relative productivity level. Finally, by generalizing the Cobb–Douglas model into constant elasticity of substitution (CES) preferences, I show that if immiserizing growth effects exist, complete specialization could not be achieved for any level of relative productivity. |
author2 |
School of Social Sciences |
author_facet |
School of Social Sciences Kang, Minwook |
format |
Article |
author |
Kang, Minwook |
author_sort |
Kang, Minwook |
title |
Comparative advantage and strategic specialization |
title_short |
Comparative advantage and strategic specialization |
title_full |
Comparative advantage and strategic specialization |
title_fullStr |
Comparative advantage and strategic specialization |
title_full_unstemmed |
Comparative advantage and strategic specialization |
title_sort |
comparative advantage and strategic specialization |
publishDate |
2019 |
url |
https://hdl.handle.net/10356/105738 http://hdl.handle.net/10220/48741 http://dx.doi.org/10.1111/roie.12300 |
_version_ |
1681043416708808704 |