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Population, Technological Progress and the Welfare of the North-South Trade: A Revisit of the Classic Ricardian Model

Abstract

This paper analyzes how the technology progress of the South country affects the welfare of the North country in a free trade world. Using the standard Ricardian model of the North-South trade, we show that, import biased technological progress of the South will undermine the welfare of the North, once the cumulative technological progress of the South exceeds a threshold. The relative population size of the South to North affects the threshold. Generally, a relatively larger South country has a lower threshold and the technological difference between the two countries remains even beyond the threshold. To a certain extent, the findings of the paper offer an theoretical explanation about the concerns of rising China in an integrated world economy.JEL Classification Codes: F1http://www.grips.ac.jp/list/jp/facultyinfo/xing_yuqing

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