We build up a simple Ricardian trade model with imperfection in the market for credit which affects the pattern of production. Workers/entrepreneurs are endowed with different levels “capital†and need to borrow to produce the credit intensive good. We argue that in such a framework...

A vast and growing empirical literature aims at identifying key determinants of sovereign default. The literature is extensive and controversial. Can policy-makers use this body of research to learn anything that can help reduce the likelihood of sovereign default? We use a variant of Extreme...

We visit the role of privatization in the location decision of firms in an industry where no firm can produce all varieties demanded. We demonstrate that the Nash equilibrium locations are socially optimal, in the presence of a publicly owned firm, notwithstanding the degree of privatization.

It is well known that high tariffs tend to induce foreign direct investment (FDI) by encouraging the investors to jump the ‘‘tariff wall.’’ This paper examines the economic interaction among tariffs, FDI, and international joint ventures (IJV). We show that in the presence of a strong...

This paper demonstrates the importance of accounting for absorption of inputs in a model of factor-augmenting international productivity differences when examining the consistency of international factor price differences with the Heckscher-Ohlin-Vanek (HOV) theorem. It is shown that the absence...

In this article we provide a theoretical analysis of the possible impact of trade and fragmentation on the skilled--unskilled wage gap in a small developing economy. In particular, we illustrate the possibility of a decline in the relative wage of the unskilled labor following an improvement in...

The importance of factor price equalization (FPE) is widely recognized in economics. The FPE theorem states that, absent any factor intensity reversal, factor prices are equal across countries with identical technologies and product mixes. In a two-factor-two-good-two-country Heckscher-Ohlin...