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dc.contributor.authorSAURE, Philip
dc.date.accessioned2007-12-17T15:35:39Z
dc.date.available2007-12-17T15:35:39Z
dc.date.issued2007
dc.identifier.issn1725-6704
dc.identifier.urihttp://hdl.handle.net/1814/7689
dc.description.abstractThe workhorse model of the New Trade Theory fails to explain four strong and central patterns of postwar trade data. These patterns are, first, the massive increase in trade volumes, second, the small fraction of traded varieties the average country imports, third the correlation between per capita income growth and trade growth, and fourth, the correlation between trade growth and growth in the number of source countries per imported good. The present paper shows that a small and reasonable change in the demand structure can reconcile the model with the data. It departs from standard theory by assuming that consumers derive bounded marginal utility from varieties. This implies that consumers purchase only the cheaper share of varieties and that expensive foreign varieties bearing high transport costs are not imported. Technological progress which increases per capita consumption of the varieties in the consumption basket decreases marginal utility derived from each of them and induces consumers to extend their consumption to more expensive varieties produced at more distant locations. This additional margin along which trade can expand induces a substantial increase in the trade share as productivity grows. Productivity change is thus identified as a joint determinant of trade shares, the number of source countries per good, and per capita income, explaining the trends and correlations in the data.en
dc.format.mimetypeapplication/pdf
dc.language.isoenen
dc.publisherEuropean University Institute
dc.relation.ispartofseriesEUI ECOen
dc.relation.ispartofseries2007/56en
dc.rightsinfo:eu-repo/semantics/openAccess
dc.subjectTrade Volumeen
dc.subjectSource Countryen
dc.subjectF1en
dc.subjectF4en
dc.titleProductivity Growth, Bounded Marginal Utility, and Patterns of Tradeen
dc.typeWorking Paperen
dc.neeo.contributorSAURE|Philip|aut|
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