Starting with Krugman (1980), much literature has analyzed how trade liberalization affects the economy based on the notion that trade is motivated by consumer’s love of variety. In this paper, I augment these preferences by the determinants of demand for heterogeneous products. The model...

There is strong evidence that different income groups consume different bundles of goods. This evidence suggests that trade liberalization can affect welfare inequality within a country via changes in the relative prices of goods consumed by different income groups (the price effect). In this...

We depart from the assumption of perfect competition in the final goods sector, commonly used in cash-in-advance (CIA) models, providing extensive theoretical analysis of the general equilibrium of an economy with imperfect competition, endogenous production and fully flexible prices in the...

In this paper we construct a stylised general equilibrium macromodel to show that demand led expansions may have unexpected effects when market imperfections lead to changes in labour productivity. We find some empirical support, from a number of European countries, for the main predictions of...

This paper shows that the degree of competition affects the current account response to nominal shocks. The mechanism hinges on the relationship between the mark-up and the degree of real rigidity of prices. In a model with intermediate goods, the degree of real rigidity increases in the markup....

We develop a two-factor, two-sector trade model of monopolistic competition with variable elasticity of substitution. Firm profit and firm size may increase or decrease with market integration depending on the degree of asymmetry between countries. The country in which capital is relatively...

We depart from the trade and wages literature and its emphasis on North-South trade, examining North-North by developing the basic linkages between trade-based integration and relative wages in an Ethier-type division of labor model. Using this model we identify a formal relationship between...

Data indicate that its domestic price in Indonesia has been increasing regardless of movements in the international price of wheat. A test for asymmetric price transmission from international wheat to domestic wheat flour markets is conducted using an error correction model and find the presence...