Abstract
The purpose of this paper is to explore the role of changes in the sectoral structure of world demand for the welfare implications of trade and international specialization. A two-countries two-goods model with external economies of scale is presented. Demand develops according to non-linear Engel-curves with phases of expansion and saturation. The economies of scale are exploited by international labor division where the two countries specialize on different sectors. A country which specializes on the production of the income-inelastic good may suffer losses from international labor division and trade.
I wish to thank G. Corneo and the other participants of the conference on “Escaping Satiation” at Jena for their discussion.
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Falkinger, J. (2001). Satiation in an international economy. In: Witt, U. (eds) Escaping Satiation. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-662-04528-2_11
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DOI: https://doi.org/10.1007/978-3-662-04528-2_11
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