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UBC Theses and Dissertations

Three essays on North-South trade, growth, and development Chayun, Tantivasadakarn


This thesis focuses on three issues pertaining to growth, development, and trade between developed and developing countries. The first essay develops an endogenous growth model that incorporates Engel’s law into the preferences. The model shows that the initial distribution of income is crucial to the outcome. A closed-economy country where most of its population is poor experiences a low rate of innovation. Income transfers from the rich to the poor can increase the effective labour supply, thereby enhancing the rate of innovation. Under free trade, only the rich benefit from trade. The poor are indifferent unless they already can afford to consume the minimum requirement of food before trade or the minimum requirement becomes affordable after trade by cheaper imported food. The initial distribution of income influences the trade patterns. Moreover, income redistribution in a free trade environment also increases the growth rate. The second essay extends the first one by assuming that the marginal product of labour of the food sector is decreasing. It shows that an increase in population may decrease the growth rate if the initial population is large relative to the productivity of the food sector. Moreover, an increase in one country’s population may reduce that country’s production share of the world’s innovation and increase its dependency on imported technology. The last essay analyzes the welfare impact of minimum-export requirements (MERs) imposed on foreign direct investments. This essay shows that MERs can be Pareto improving measures to both the source and the host countries. When offshore plants are used by parent firms to compete with domestic firms in the source country, MERs can improve the host country’s welfare by inducing the total sales in the source country to rise, thereby reducing the distortion generated by imperfect competition. The MERs can simultaneously improve the welfare of the host country by shifting profits of the foreign firms toward the local firms. If the local firms are absent, the host’s welfare may still be improved if sufficient profits from foreign operations are retained in the host country.

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