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Structural change in a Ricardian world economy: The role of extensive rent
Last modified: 2018-06-20
Abstract
We study an implication of the Ricardian theory of differential extensive rent in a free trade regime. To this effect we develop a Ricardian two country two commodity open economy model. We assume that, unlike labour, land is heterogeneous both within and across countries and that the ratio of high to low quality land is different among the trading countries. By means of a numerical example we show that as the process of worldwide capital accumulation proceeds an industrial country may find it convenient to increase its domestic corn production and even reverse completely the pattern of its imports and exports.
Keywords
capital accumulation, international trade, structural change, Ricardian economics, Heckscher-Ohlin model
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