Extension of krugman’s comparative advantage model: Blessed fuels and cursed metals

Krugman’s dynamic comparative advantage model deals with spending effect from resource dividends. In its original setup dividends from resource export result in higher relative wages and therefore the Home country loses its production share to the Foreign country. The model had minor modifications so Home country has natural resources that can be either exported or used in production of traded goods. The learning is associated only with non-resource part of traded good production, and therefore the specialization range for resource producing country is narrower consequently it can easily lose... Mehr ...