Abstract

International Trade and Factor Prices in a Model with Nonhomothetic Production Functions

John P. Burkett

Institute for the Study of International Aspects of Competition

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.