Abstract
The popular Dixit-Stiglitz-Ethier framework proposes that globalization increases the menu of intermediate goods available to downstream firms and that gains from specialization raise welfare unambiguously. This study shows that both results depend critically on the assumption that demand elasticities are invariable. The more general framework presented here provides two main insights: First, whether specialization rises or falls depends ultimately on the shape of the cost function, and second, globalization can actually reduce welfare in the case when specialization falls.
| Item Type: | Journal article |
|---|---|
| Faculties: | Economics Economics > Chairs > Seminar for International Trade Theory and Trade Policy |
| Subjects: | 300 Social sciences > 330 Economics |
| Language: | English |
| Item ID: | 20533 |
| Date Deposited: | 15. Apr 2014, 09:00 |
| Last Modified: | 04. Nov 2020, 13:01 |
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