This paper develops a model of North-South trade with a continuum of goods, external economies of scale and international capital mobility. The North-South wage gap must exceed any difference in labour quality for South to overcome the established external economies in North. In equilibrium,...

This paper examines the effect of a technical change on the pattern of North-South trade in the presence of increasing returns to scale in production. The model shows that if the North initially takes advantage of the economies of scale in advance of the South, the relative wage will be higher...