
handle: 10419/85666
Division of labour models have become a standard analytical tool, along with competitive general equilibrium models (Ricardian, HOS, Ricardo-Viner), in public finance, trade, growth, development and macroeconomics. Yet unlike the earlier models, these models lack a canonical graphical representation. This is because they are both new and complex, characterised by multiple equilibria, instability and emergent structural properties under parameter transformation. We develop a general framework for such models, illustrating results from current research on specialisation models, and explaining why one sub-class of these models is particularly difficult to illustrate. One of the great traditions in the analysis of international trade is the use of canonical models: Ricardian, Ricardo-Viner, and Heckscher-Ohlin-Samuelson. Furthermore, each of these models has a simple graphical representation, useful for both intuition generation and for pedagogical purposes. Over the last fifteen years, two additional classes of model have joined the big three: strategic trade models and division of labour models.' The strategic trade models entered the literature with simple graphical representations developed in the industrial organisation literature, while the division of labour models have proven to be considerably more resistant to simple representation. Recent applications work with specific functional forms, and often involve numeric simulation, obscuring for some the general properties of these models. Even so, a set of general results (low-level equilibrium traps, catastrophic adjustment, agglomeration effects) do stand out from this somewhat diverse collection of special models. Because our starting point in this paper involves examination of this class of models in the context of relatively general functional forms and technologies (linear homothetic, concave, etc.), we are able to offer a generalised treatment that links this pattern of results to the general properties of models with increasing returns due to specialisation. In the process, we demonstrate that important results in the recent literature depend critically on the stability and transformation properties that characterise the general framework highlighted here. These properties are closely related to those explored in the context of scale economy models by an earlier generation of trade and development economists.
agglomeration, O12, Internationale Arbeitsteilung, ddc:330, EUR ESE 01, O41, Agglomeration; location of industry; Specialization; trade and development, specialization, trade and development, Außenwirtschaftstheorie, location of industry, F12, specialization; trade and development; location of industry; agglomeration, Theorie, jel: jel:F12, jel: jel:O41, jel: jel:O12
agglomeration, O12, Internationale Arbeitsteilung, ddc:330, EUR ESE 01, O41, Agglomeration; location of industry; Specialization; trade and development, specialization, trade and development, Außenwirtschaftstheorie, location of industry, F12, specialization; trade and development; location of industry; agglomeration, Theorie, jel: jel:F12, jel: jel:O41, jel: jel:O12
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