Divergnce, Convergence, and the Gains from Trade

This paper is about a country which has enjoyed a comparative advantage in producing some good(s) and suddenly finds its trading partners increasing their productivity in producing precisely those same goods; e.g., the U.S. with its big lead in many kinds of manufacturing production in the 1950s and 1960s, and the rest of the world catching up in the same kinds of goods in the 1970s and 1980s. This is what the paper means by "convergence." We show that such convergence results in an absolute loss of real income and standard of living for the original "leader" country. Copyright 1995 by Blackwell Publishing Ltd. (This abstract was borrowed from another version of this item.)