First Mover Advantages, Blockaded Entry, And the Economics of Uneven Development
James R. Markusen
A two-sector, two-period trade model is developed in which one sector has increasing returns
based on the creation of specialized intermediate inputs. One of the two (otherwise identical)
countries is not able to enter the increasing returns sector in the first period through some
"accident of history". A theoretical and numerical analysis solves for parameter regimes under
which firms in the disadvantaged country are or are not able to enter the increasing returns
sector in the second period. The welfare consequences of the two alternative second period
outcomes are compared to one another and to an equilibrium with both countries entering in
the first period. The disadvantaged country may fall further behind in the second period even
when its firms are able to enter.
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