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- Title
Uneven Development and Bilateral Conflict.
- Authors
Skott, Peter; Sethi, Rajiv
- Abstract
We consider the dynamics of bilateral conflict within the framework of a standard two-country, two-sector model of international trade with increasing returns in one sector. Free trade leads to asymmetric equilibria among otherwise identical countries and, in some circumstances, to uneven development in the sense of persistent disparities in wages, income and welfare. In the latter case, distortionary industrial policy by the less developed country may be welfare enhancing. When the dynamics of policy change are endogenized, the model gives rise to periodic changes in industrial leadership or leapfrogging. Implications of this phenomenon for the empirical literature on convergence are discussed.
- Subjects
INTERNATIONAL trade; ECONOMIC equilibrium
- Publication
Metroeconomica, 2000, Vol 51, Issue 4, p380
- ISSN
0026-1386
- Publication type
Article
- DOI
10.1111/1467-999x.00097