Immiserizing Growth and the Metzler Paradox in the Ricardian Model

Conditions for the occurrence of immiserizing growth and the Metzler paradox are analysed in the Ricardian model when consumers in the foreign country have Leontief preferences while consumers in the home country have Cobb-Douglas preferences. By using specific functional forms, the conditions for the occurrence of the two paradoxes are defined in terms of the exogenous parameters of the model rather than endogenous variables such as the foreign import demand elasticity in the conditions of Bhagwati (1958) Bhagwati, J. N. 1958. Immiserizing growth: a geometrical note. Review of Economic Studies, 25: 201–205. Crossref], Web of Science ®] , Google Scholar] and Metzler (1949a Metzler, L. A. 1949a. Tariffs, the terms of trade and the distribution of national income. Journal of Political Economy, 57: 1–29. Crossref], Web of Science ®] , Google Scholar], b Metzler, L. A. 1949b. Tariffs, international demand, and domestic prices. Journal of Political Economy, 57: 345–351. Crossref], Web of Science ®] , Google Scholar]). It is shown that the simultaneous occurrence of both paradoxical results is possible for some parameter values.