Publication Type
Journal Article
Version
submittedVersion
Publication Date
11-2009
Abstract
Equilibrium in international trade with increasing returns in infrastructure depends on whether the infrastructure provider is “naïve” or sophisticated. A monopolist produces infrastructure under decreasing cost using fixed equipment. Unlike similar work, we derive a unique closed-economy equilibrium. In a small open economy, with “naïve” infrastructure provider(s), multiple equilibria obtain. The industrial export potential of the economy depends on unexhausted economies of scale, and equilibria are possible where manufactures are exported despite an autarky price higher than the world price. With a sophisticated infrastructure provider, even an open economy has a unique equilibrium, which, at least as long as economies of scale are unexhausted, also involves more industrialization than the “naïve” equilibria. Access to the unlimited world market is necessary for significant industrialization but is not sufficient: one may also require “Schumpeterian” entrepreneurs, monopolists with a panoramic vision of the economy and of their catalytic role in it.
Discipline
Growth and Development | International Economics
Research Areas
Macroeconomics
Publication
Review of International Economics
Volume
17
Issue
5
First Page
1053
Last Page
1065
ISSN
1467-9396
Identifier
10.1111/j.1467-9396.2008.00789.x
Publisher
Wiley
Citation
GUHA, Ashok S. and GUHA, Brishti.
Trade, Growth and Increasing Returns to Infrastructure: The Role of the Sophisticated Monopolist. (2009). Review of International Economics. 17, (5), 1053-1065.
Available at: https://ink.library.smu.edu.sg/soe_research/1083
Copyright Owner and License
Authors
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Additional URL
https://doi.org/10.1111/j.1467-9396.2008.00789.x