Why might a country want to develop its comparative disadvantage industries? A general equilibrium analysis
journal contributionposted on 05.06.2017, 01:39 by Cheng, Wenli, Zhang, Dingsheng
This paper develops a general equilibrium 2x2 Ricardian model that demonstrates the possibility of immiserizing growth as a result of a productivity improvement in a country's export industry. The model also shows that immiserizing growth can be avoided by improving the productivity of the country's comparative disadvantage industry. However this strategy may inflict harm on its trading partner. In comparison, a balanced growth strategy can improve welfare of the growing country without hurting its trading partner.