Working Paper: CEPR ID: DP1813
Authors: Joseph F. Francois; Douglas Nelson
Abstract: 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, specialization models lack a canonical representation. This is because they are both new and complex, characterized 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 specialization models, and explaining why one sub-class of these models is particularly difficult to illustrate easily.
Keywords: specialization; trade; development; location of industry; agglomeration
JEL Codes: F12; O12; O41
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| specialization models (F12) | multiple Pareto-rankable equilibria (D50) |
| multiple Pareto-rankable equilibria (D50) | welfare losses relative to autarky (D69) |
| national production externalities (D62) | suboptimal outcomes (I14) |
| curvature of transformation frontiers (F12) | stability of equilibria (C62) |
| returns to specialization (Z00) | stability of equilibria (C62) |
| international production externalities (F29) | catastrophic collapses of manufacturing sectors (O14) |
| government intervention (O25) | push economies past critical thresholds of industrialization (O14) |
| push economies past critical thresholds of industrialization (O14) | sustained economic growth (O29) |