On the impact of trade on the industrial structures of nations

Authors


  • We wish to thank the Editor, an anonymous referee, and workshop/conference participants at Academia Sinica, Hitotsubashi University, Kobe University, Otaru University of Commerce, Taipei National University, University of Tokyo and ARSC 2009 for very useful comments and suggestions. D. Oyama, Y. Sato and T. Tabuchi acknowledge financial support by the Japan Society for the Promotion of Science Grant-in-Aid for Young Scientists (B), Scientific Research (S), and Scientific Research (A). Part of this research was developed while D. Oyama was visiting CORE and the Paris School of Economics, whose hospitality is gratefully acknowledged.

Abstract

This paper investigates the impact of progressive trade openness on the formation of entrepreneurship in a two-country occupation choice model with monopolistic competition. We show that trade opening gives rise to a non-monotonic process of international specialization, in which the share of entrepreneurial firms in the large (small) country first increases (decreases) and then decreases (increases), with the global economy exhibiting first deindustrialization and then reindustrialization.

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