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The International Demonstration Effect And The Domestic Division Of Labour: A Simple Model

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  • Po‐Ting Liu
  • Guang‐Zhen Sun

Abstract

. The implications of the international demonstration effect (IDE) for the development of underdeveloped economies have long been studied and debated. Yet few formal analyses exist in the literature, especially regarding its implications for the growth of domestic markets and the division of labour in developing economies. We offer an analysis of endogenous specialization under the IDE, the first of its kind, showing that, far more complicated than the scenario held by conventional wisdom, the IDE makes more difficult the emergence of the market underpinning the domestic division of labour, but facilitates the expansion of the market once it has been developed.

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  • Po‐Ting Liu & Guang‐Zhen Sun, 2005. "The International Demonstration Effect And The Domestic Division Of Labour: A Simple Model," Pacific Economic Review, Wiley Blackwell, vol. 10(4), pages 515-528, December.
    • Handle: RePEc:bla:pacecr:v:10:y:2005:i:4:p:515-528
    DOI: 10.1111/j.1468-0106.2005.00289.x
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    1. Thorstein Veblen, 1899. "Mr. Cummings's Strictures on "The Theory of the Leisure Class"," Journal of Political Economy, University of Chicago Press, vol. 8(1), pages 106-106.
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    4. Wagner, Alfred, 1891. "Marshall's Principles of Economics," History of Economic Thought Articles, McMaster University Archive for the History of Economic Thought, vol. 5, pages 319-338.
    5. Enrichetta Ravina, 2005. "Keeping Up with the Joneses: Evidence from Micro Data," 2005 Meeting Papers 557, Society for Economic Dynamics.
    6. Veblen, Thorstein, 1899. "The Theory of the Leisure Class," History of Economic Thought Books, McMaster University Archive for the History of Economic Thought, number veblen1899.
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    Cited by:

    1. Durga P. Gautam, 2014. "Remittances and Governance: Does the Government Free Ride?," Working Papers 14-40, Department of Economics, West Virginia University.

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    More about this item

    JEL classification:

    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development

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