ch04trade model extensions and applications(国际经济学浙江林学院,岑丽娟)

Carbaugh, Chap. 4
7
Economies of scale
Economies of scale as basis for trade
Carbaugh, Chap. 4
8
Economies of scale
Trade & specialization under decreasing costs
They use factor inputs which are of uniform quality
They all use the same technology
Carbaugh, Chap. 4
3
Factor endowment model
Comparative advantage according to factor
Carbaugh, Chap. 4
2
Why relative price differentials?
Factor endowment theory: assumptions
Nations all have the same tastes and preferences (same indifference curves)
Indicates that workers may be better or worse off, depending on preferences
Predicts that owners of factors used in export industries gain from trade, while owners of factors used in import-competing industries will lose from trade
Economies of scale & specialization
Economies of scale provide incentives for specialization, since per unit costs go down as production increases
Trade provides a larger potential market for products, making higher production levels possible
endowment theory
Aut. 4
4
Factor endowment model
Comparative advantage according to factor
endowment theory
Post-trade equilibrium
Carbaugh, Chap. 4
9
Bringing theory closer to reality
Other extensions of the theory
Overlapping demands Intra-industry trade Product cycles Dynamic comparative advantage -
Distribution of income
Trade changes domestic distribution of income as demand for different factors changes
Carbaugh, Chap. 4
6
Bringing theory closer to reality
Free trade under increasing costs
Transportation costs of $2000 per auto
Carbaugh, Chap. 4
12
Bringing theory closer to reality
Specific factor theory
Looks at the income distribution effects of trade in the short run, when some factor inputs are not mobile among sectors
International Economics
By Robert J. Carbaugh 8th Edition
Chapter 4: Trade Model Extensions and Applications
Copyright ©2002, South-Western College Publishing
industrial policy
Carbaugh, Chap. 4
10
Transportation costs
Free trade under increasing costs
No transportation costs
Carbaugh, Chap. 4
11
Transportation costs
Nations export products that use inputs which are relatively abundant (cheap) at home, and import products which need inputs which are relatively scarce (expensive) at home
Carbaugh, Chap. 4
5
Factor endowment model
Factor endowment theory: implications
Factor price equalization
The shift within each nation towards use of cheaper factors, and away from expensive ones, leads to more equal factor prices
Carbaugh, Chap. 4
13
Bringing theory closer to reality
Relative prices and the specific factor model
Carbaugh, Chap. 4
14
Why relative price differentials?
Factor endowment theory (Heckscher-Ohlin)
Comparative advantage is explained entirely by different national supply conditions, especially resource endowments