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Country Size, Specialization Patterns and Secular Demand Stagnation

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  • Yoshiyasu Ono

Abstract

Using a dynamic two-country two-commodity Ricardian model where preference for money (or wealth) leads to aggregate demand deficiency, this paper examines the relationship between the two countries’ relative population size and their specialization patterns, employment and consumption. When the countries have similar population sizes, they specialize in respective commodities with comparative advantage. In this case a larger foreign, or a smaller home, population raises the relative price of the home commodity. It raises home real income and consumption per capita if full employment prevails in the home country. If unemployment appears, however, home employment and consumption per capita decrease.

Suggested Citation

  • Yoshiyasu Ono, 2017. "Country Size, Specialization Patterns and Secular Demand Stagnation," CESifo Working Paper Series 6752, CESifo.
    • Handle: RePEc:ces:ceswps:_6752
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    More about this item

    Keywords

    secular demand stagnation; liquidity trap; unemployment; population; specialization pattern;
    All these keywords.

    JEL classification:

    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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