International Trade and Factor Prices in a Model with Nonhomothetic Production Functions
Working Paper 95-1
The idea that market size can affect income distribution traces back to Smith, Ravenstone, Marx, and Ohlin. That idea is formalized in this paper by means of a general equilibrium model of monopolistic competition with nonhomothetic production functions. A simulation experiment using this model shows how market integration can alter factor prices as well as the number and size of firms.
JEL classification: D33, F12
Key words: international trade; income distribution; monopolistic competition; nonhomotheticity.