《国际经济学（双语）》全套教学课件

InternationalEconomicsChapter1ClassicalTheoriesofInternationalTradeChapter2NewClassicalTheoriesofInternationalTradeChapter3ModernTradeTheoriesChapter4TariffsandNontariffBarriersChapter5RegionalTradingArrangementsChapter6BalanceofPaymentsandForeignExchangeChapter7TheoriesofExchangeRateDeterminationChapter8BalanceofPaymentsAdjustmentsChapter9MacroeconomicPoliciesinOpenEconomyChapter10InternationalTransmissionandCoordinationofMacroeconomicPoliciesChapter11InternationalFactorMovementsandMultinationalEnterprises全套可编辑PPT课件ClassicalTheoriesofInternationalTradeInternationalEconomicsChapter1Chapter1ClassicalTheoriesofInternationalTrade1.1Mercantilism1.2TradeBasedonAbsoluteAdvantage:AdamSmith1.3TradeBasedonComparativeAdvantage:DavidRicardo1.4ComparativeAdvantageandOpportunityCost1.5ComparativeAdvantagewithMoreThanTwoCommoditiesandCountries1.6TheoryofReciprocalDemand1.7OfferCurveandTermsofTrade1.1MercantilismThemercantilistsadvocatedgovernmentregulationoftradetopromoteafavorabletradebalance.Ifacountrycouldachieveafavorabletradebalance,itwouldreceivepaymentsfromtherestoftheworldintheformofgoldandsilver.Suchrevenueswouldcontributetoanincreaseinspendingandthusariseindomesticoutputandemployment.CriticsPossibleonlyforshorttermAssumingstaticworldeconomy

Chapter1ClassicalTheoriesofInternationalTrade1.1Mercantilism1.2TradeBasedonAbsoluteAdvantage:AdamSmith1.3TradeBasedonComparativeAdvantage:DavidRicardo1.4ComparativeAdvantageandOpportunityCost1.5ComparativeAdvantagewithMoreThanTwoCommoditiesandCountries1.6TheoryofReciprocalDemand1.7OfferCurveandTermsofTrade1.2TradeBasedonAbsoluteAdvantage:AdamSmithWithfreetrade,countriescouldconcentratetheirproductiononthegoodstheycouldproducemostcheaplyandenjoyalltheconsequentbenefitsfromthelabordivision.Costdifferencesgoverntheinternationalmovementofgoods.Theconceptofcostisfoundeduponthelabortheoryofvalue.Twoassumptions,withineachcountry:Laboristheonlyfactorofproductionandishomogeneous(i.e.ofonequality).Thecostorpriceofagooddependsexclusivelyupontheamountoflaborrequiredtoproduceit.1.2TradeBasedonAbsoluteAdvantage:AdamSmithAnarithmeticexample

TheU.S.hasanabsoluteadvantageiniPadproduction;itsiPadworkers'productivity(outputperworkerhour)ishigherthanthatoftheU.K,whichleadstolowercosts(lesslaborrequiredtoproduceasetofiPad).Inlikemanner,theU.Khasanabsoluteadvantageinclothproduction.1.2TradeBasedonAbsoluteAdvantage:AdamSmithACaseofAbsoluteAdvantageCountryOutputperLaborHouriPadClothU.K.U.S.5sets15sets20yards10yardsChapter1ClassicalTheoriesofInternationalTrade1.1Mercantilism1.2TradeBasedonAbsoluteAdvantage:AdamSmith1.3TradeBasedonComparativeAdvantage:DavidRicardo1.4ComparativeAdvantageandOpportunityCost1.5ComparativeAdvantagewithMoreThanTwoCommoditiesandCountries1.6TheoryofReciprocalDemand1.7OfferCurveandTermsofTrade1.3TradeBasedonComparativeAdvantage:DavidRicardoMutuallybeneficialtradecanoccurevenwhenonecountryisabsolutelymoreefficientintheproductionofallgoods.Themoreefficientcountryshouldspecializeinandexportthatgoodinwhichitisrelativelymoreefficient(whereitsabsoluteadvantageisbigger).Thelessefficientcountryshouldspecializeinandexportthegoodinwhichitisrelativelylessinefficient(whereitsabsolutedisadvantageissmaller).Assumptionsofasimplifiedmodel

Thereareonlytwocountrieswithafixedleveloftechnologyintheworld;Eachcountryownsonlyoneinput–labor,whichisfixedendowedandhomogenousandcanmoveacrossindustriesbutcannotflowacrosscountries;Eachcountryproducestwocommodities;Perfectcompetitionandfreetradeprevailinmarkets.1.3TradeBasedonComparativeAdvantage:DavidRicardoAnExampleofComparativeAdvantageTheU.S.laborhasa5-to-1absoluteadvantageintheproductionofiPads.TheU.S.laboralsohasa3-to-1absoluteadvantageintheproductionofcloth.TheU.S.hasagreaterabsoluteadvantageinproducingiPadsthaninproducingcloth.ChinahasanabsolutedisadvantageintheproductionofiPadsandcloth.However,China’sabsolutedisadvantageissmallerinproducingcloththaninproducingiPads.1.3TradeBasedonComparativeAdvantage:DavidRicardoACaseofComparativeAdvantageCountryOutputperlaborhouriPadsClothRelativecostU.S.5sets15yards1iPad=3yardsofclothChina1set5yards1iPad=5yardsofclothGainsfromSpecializationandTradewithComparativeAdvantage

AstheU.S.transfers1worker

fromclothproductiontoiPadproduction,itsoutputofiPadsincreasesby5andclothproductionfallsby15yards.AsChinatransfers3workersfromiPadproductiontoclothproduction,itsclothproductionincreasesby15yardsandiPadproductionfallsby3.Thegainfromproductionandtradeistheincreaseintheworldoutputthatresultsfromeachcountryspecializinginitsproductionaccordingtoitscomparativeadvantage.

1.3TradeBasedonComparativeAdvantage:DavidRicardoTheChangeintheWorldOutputResultingfromSpecializationCountryChangeintheproductionofiPadsClothU.S.+5sets-15yardsChina-3sets+15yardsChangeintheWorldOutput+2sets0ComparativeAdvantageinMoneyTerms

Atthiswagerate,China’saveragecostindollarsofproducingclothislessthantheU.S.averagecost.Withperfectlycompetitivemarkets,China’ssellingpriceofclothislowerthanitsU.S.sellingprice,andChinaexportsclothtotheU.S..EventhoughChinaisnotasefficientastheU.S.intheproductionofcloth,itslowerwagerateintermsofdollarsmorethancompensatesforitsinefficiency.1.3TradeBasedonComparativeAdvantage:DavidRicardoComparativeAdvantageinMoneyPricesCountryLaborInputHourlyWageRateiPad(sets)Cloth(yards)QuantityPriceQuantityPriceU.S.1$205$415$1.33China1$51$55$1Chapter1ClassicalTheoriesofInternationalTrade1.1Mercantilism1.2TradeBasedonAbsoluteAdvantage:AdamSmith1.3TradeBasedonComparativeAdvantage:DavidRicardo1.4ComparativeAdvantageandOpportunityCost1.5ComparativeAdvantagewithMoreThanTwoCommoditiesandCountries1.6TheoryofReciprocalDemand1.7OfferCurveandTermsofTrade1631.4ComparativeAdvantageandOpportunityCostOpportunityCostOpportunitycostisthequantityofonegoodthatmustbegivenuptoreleaseenoughresourcestoproduceonemoreunitofanothergood.Themarginalrateoftransformation(MRT)isthequantityofonegoodthatitmustabandontoproduceeachadditionalunitofanothergood.GainsfromSpecializationandTradewithOpportunityCosts

Bothcountriesarebetteroffwhentheyspecializeandtrade.1.4ComparativeAdvantageandOpportunityCostProductionandConsumptionwithandwithoutTradeBasedonanexchangeratioof1iPad=4yardsofclothItemCountryU.S.ChinaProductionatFullEmployment100iPads0yardofcloth0iPad300yardsofclothConsumptionwithTrade50iPads200yardsofcloth50iPads100yardsofclothDomesticProductionandConsumptionwithoutTrade50iPads150yardsofcloth40iPads100yardsofclothGainsfromSpecializationandTrade50yardsofcloth10iPadsProductionPossibilitiesFrontierandConstantOpportunityCostsAproductionpossibilitiesfrontier(PPF)showsthedifferentcombinationsoftwogoodsthatcanbeproducedwhenallofacountry’sfactorsofproductionarefullyemployedintheirmostefficientway.TheslopeofPPFisreferredtoasthemarginalrateoftransformation(MRT),whichshowstheamountofoneproductacountrymustsacrificetogetoneadditionalunitoftheotherproduct.Withoutspecializationandtrade,theU.S.andChinacanproduceandconsumeatanypointalongtheirrespectiveproductionpossibilitiesfrontiers.1.4ComparativeAdvantageandOpportunityCost1.4ComparativeAdvantageandOpportunityCostPPFfortheU.S.andChinaatFullEmploymentU.S.ChinaNumbersofiPadsYardsofClothNumbersofiPadsYardsofCloth100060090305050806040100709030150601202020050150102504018003003021020240102700300PointsbelowthePPF,say,PointBorB',representpossibleproductioncombinationsthatcanbeproducedbutareinefficientbecausetherewouldbesomeunemployedresources.PointsabovethePPF,say,PointCorC',representproductioncombinationsthatarenotpossibleforacountrytoproducewithavailableresourcesandtechnology.1.4ComparativeAdvantageandOpportunityCost1.4ComparativeAdvantageandOpportunityCostWitheachcountryspecializingintheproductionofthegoodinwhichithasacomparativeadvantage,10moreiPadsand50moreyardsofclothareproducedintheworld.Withtrade,thesetofconsumptionpointsthatacountrycanachieveisdeterminedbythetermsoftrade–therelativepriceoftradingiPadsforcloth,andviceversa.Bothcountriesarebetteroffbyspecializingandtradethantheywouldbewithouttrade.ChangesintheGainsfromSpecializationandTrade1.4ComparativeAdvantageandOpportunityCostProductionandConsumptionwithandwithoutTradeBasedonanexchangeratioof1iPad=3.5yardsofclothItemCountryU.S.ChinaProductionatFullEmployment100iPads0yardofcloth0iPad300yardsofclothConsumptionwithTrade50iPads175yardsofcloth50iPad125yardsofclothDomesticProductionandConsumptionwithoutTrade50iPads150yardsofcloth40iPads100yardsofclothGainsfromSpecializationandTrade0iPad25yardsofcloth10iPads25yardsofcloth

Astheinternationalexchangeratio(termsoftrade)changesfrom1iPadfor4yardsofclothto1iPadfor3.5yardsofcloth,thetradingpossibilitiescurvemovesforeachcountry.ChangesintheTermsofTradefortheU.S.andChina

1.4ComparativeAdvantageandOpportunityCostDistributionoftheGainsfromTradeChangesinacountry’stermsoftradeovertimeindicatewhetheracountrycanobtainmoreorlessquantityofimportsperunitofexports.Achangeinacountry’stermsoftrademayreflectachangeineitherinternationalordomesticeconomicconditions.Whenthetermsoftradechangeasaresultofachangeindomesticeconomicconditions,theeffectonthecountry’swelfareisuncertain.1.4ComparativeAdvantageandOpportunityCostCompleteSpecializationEachcountryspecializescompletelyintheproductionofthegoodinwhichithasacomparativeadvantageandimportstheothergood.Completespecializationoccursbecauseasproductionexpandsintheindustrywithacomparativeadvantage,thedomesticcostofproducingtheproductdoesnotrise.Constantcostsareassumedtoprevailovertheentirerangeofproduction.1.4ComparativeAdvantageandOpportunityCostThefirm’scostcurvesandtheproduct’ssupplycurvesarehorizontal.SupplyCurvesofaGoodandthePPF

1.4ComparativeAdvantageandOpportunityCostTradeunderIncreasingOpportunityCosts

IncreasingCostsandthePPFThePPFandSupplyCurveunderIncreasingCostConditions1.4ComparativeAdvantageandOpportunityCostTheslopeofthePPFatanypointisrepresentedgraphicallybytheslopeofatangenttothatpoint.Acountryhasincreasingopportunitycosts.

thetangentFGissteeperthanDE.Tworeasons:thefactorsofproductionusedtoproducetheproductsarespecializedintheproductionofaparticularproduct.thepremisethatallresourcesareidenticalinthesensethatallworkersandcapitalhavethesameproductivityintheproductionofbothcommoditiesisunrealistic.1.4ComparativeAdvantageandOpportunityCostProductionandConsumptionwithoutSpecializationandTradeWithoutspecializationandtrade,theU.S.andChinacanproduceandconsumeatanypointontheirPPF.ProductionandConsumptionwithSpecializationandTrade

SpecializationandTradeunderIncreasingCostConditions

1.4ComparativeAdvantageandOpportunityCostTradeTriangleTradeTriangleSpecializinginandexportingthegoodinwhichthecountryhasacomparativeadvantageandtradingfortheothergoodenablesbothcountriestobecomebetteroffbyconsumingbeyondtheirrespectivePPFs.Productionunderincreasingcostconditionsconstitutesamechanismthatforcespricestoconvergeandresultsinneithercountryspecializingcompletelyintheproductionofthegoodinwhichithasacomparativeadvantage.Inthecaseofincreasingcosts,bothcountriescontinuetoproducebothgoodsaftertradeanditiscalledaspartialspecialization.1.4ComparativeAdvantageandOpportunityCostChapter1ClassicalTheoriesofInternationalTrade1.1Mercantilism1.2TradeBasedonAbsoluteAdvantage:AdamSmith1.3TradeBasedonComparativeAdvantage:DavidRicardo1.4ComparativeAdvantageandOpportunityCost1.5ComparativeAdvantagewithMoreThanTwoCommoditiesandCountries1.6TheoryofReciprocalDemand1.7OfferCurveandTermsofTrade1.5ComparativeAdvantagewithMoreThanTwoCommoditiesandCountriesComparativeAdvantagewithMoreThan2CommoditiesEachcountrywillthenhaveacomparativeadvantageinthecommoditiesthatitexportsattheparticularequilibriumexchangerateestablished.CommodityPricesintheU.S.andU.K.CommodityPriceintheU.S.($)PriceintheU.K.(￡)ABCDE246810643211.5ComparativeAdvantagewithMoreThanTwoCommoditiesandCountriesIftheexchangerateis￡1=$2,thedollarpricesofthecommoditiesintheU.K.wouldbe:

TheU.S.willexportCommoditiesAandBtotheU.K.andimportCommoditiesDandEfromtheU.K.,leavingCommodityCnottraded.CommodityABCDEDollarpriceintheU.K1286421.5ComparativeAdvantagewithMoreThanTwoCommoditiesandCountriesIftheexchangeratebecomes￡1=$3.ThedollarpricesofthecommoditiesintheU.K.wouldbe:

TheU.S.willexportCommoditiesA,BandCtotheU.K.andimportCommoditiesDandEfromtheU.K.

CommodityABCDEDollarpriceintheU.K18129631.5ComparativeAdvantagewithMoreThanTwoCommoditiesandCountriesIftheexchangerateturnstobe￡1=$1,thedollarpricesofthecommoditiesintheU.K.wouldbe:TheU.S.wouldexportonlyCommodityAtotheU.K.andimportallothercommodities,withtheexceptionofCommodityB.CommodityABCDEDollarpriceintheU.K64321ComparativeAdvantagewithMoreThan2Countries

GiventheequilibriumPW/PC=3withtrade,CountriesAandBwillexportwheattoCountriesDandEinexchangeforcloth.CountryCwillnotengageininternationaltradeinthiscasebecauseitspre-tradePW/PCequalstheequilibriumPW/PCwithtrade.GivenatradeequilibriumPW/PC=4,CountriesA,BandCwillexportwheattoCountryEinexchangeforcloth,andCountryDwillnotengageintheinternationaltrade.IftheequilibriumturnstobePW/PC=2withtrade,CountryAwillexportwheattoalltheothercountriesexceptCountryB,inexchangeforcloth.1.5ComparativeAdvantagewithMoreThanTwoCommoditiesandCountriesRankingofCountriesinTermsofInternationalPW/PCCountryABCDEPW/PC12345Chapter1ClassicalTheoriesofInternationalTrade1.1Mercantilism1.2TradeBasedonAbsoluteAdvantage:AdamSmith1.3TradeBasedonComparativeAdvantage:DavidRicardo1.4ComparativeAdvantageandOpportunityCosts1.5ComparativeAdvantagewithMoreThanTwoCommoditiesandCountries1.6TheoryofReciprocalDemand1.7OfferCurveandTermsofTrade1.6TheoryofReciprocalDemandTheoryofreciprocaldemandsuggeststhattheactualpriceatwhichtradetakesplacedependsonthetradingpartners’interactingdemands.Accordingtothetheoryofreciprocaldemand,finaltermsoftradewillbeclosertothedomesticpriceratioofthecountrywithstrongerdemandfortheimportedgood.Thereciprocaldemandtheorycontendsthattheequilibriumtermsoftradedependontherelativestrengthofeachcountry’sdemandfortheothercountry’sproduct.1.6TheoryofReciprocalDemandThestrongerCanadiandemandforautosrelativetoU.S.demandforwheat,thecloserthetermsoftradewillbetoCanadiandomesticpriceratio,andviceversa.EquilibriumTerms-of-TradeLimits

1.6TheoryofReciprocalDemandThereciprocaldemandtheorybestapplieswhenbothcountriesareofequaleconomicsize,sothatthedemandofeachcountryhasanoticeableeffectonthemarketprice.Ifonecountryissignificantlylargerthantheother,thelargercountryattainsfewergainsfromtradewhilethesmallercountryattainsmostofthegainsfromtrade.Thissituationischaracterizedastheimportanceofbeingunimportant.

Chapter1ClassicalTheoriesofInternationalTrade1.1Mercantilism1.2TradeBasedonAbsoluteAdvantage:AdamSmith1.3TradeBasedonComparativeAdvantage:DavidRicardo1.4ComparativeAdvantageandOpportunityCost1.5ComparativeAdvantagewithMoreThanTwoCommoditiesandCountries1.6TheoryofReciprocalDemand1.7OfferCurveandTermsofTrade1.7OfferCurveandTermsofTradeOfferCurveTheoffercurve(orreciprocaldemandcurve)ofacountryindicatesthequantityofimportsandexportsthecountryiswillingtobuyandsellontheworldmarketatallpossiblerelativeprices.Inshort,thecurveshowsthecountry’swillingnesstotradeatvariouspossibletermsoftrade.Theoffercurvereallyisacombinationofademandcurveandasupplycurve.1.7OfferCurveandTermsofTradeDerivinganoffercurve:tradetriangleapproachTradeTrianglesatTwoPossibleTermsofTrade

1.7OfferCurveandTermsofTrade

Theconstructionoftheoffercurveiscompletedbyconnectingallpossiblepointsatwhichacountryiswillingtotrade.

AlternativeTermsofTradeandExport-ImportCombinationsontheOfferCurve

1.7OfferCurveandTermsofTradeEquilibriumTermsofTrade

PointEisthetradingequilibrium.TOTEisthemarket-clearingpriceratio.

TradingEquilibrium

1.7OfferCurveandTermsofTradeShiftsofOfferCurvesShiftsinCountryI’sOfferCurve

ReasonsforShifts:Achangeintastesfortheimportedgood;Ariseinincomethatleadstoanincreaseddemandforimports;AnimprovementinproductivityinCountryI’sexportindustries.1.7OfferCurveandTermsofTradeWhenoffercurvesshift,theequilibriumtermsoftradeandvolumeoftradechange.IncreasedDemandforImportsbyCountryI

1.7OfferCurveandTermsofTradeTermsofTradeEstimatesTherelativepriceratioPX/PYintheoffercurvediagramiscalledasthecommoditytermsoftrade,ornetbartertermsoftrade.Theeconomicinterpretationofthetermsoftrade:

Asthepriceofexportsrisesrelativetothepriceofimports,eachunitofacountry’sexportsisabletopurchasealargerquantityofimports.Thus,moreimports,whichlikeanyothergoodsbringutilitytoconsumers,canbeobtainedwithagivenvolumeofexports,andthecountry’swelfareonthebasisofthosepricerelationsalonehasimproved.1.7OfferCurveandTermsofTradeIncalculatingthetermsoftradeforanygivencountry,apriceindexmustthereforebecalculatedforexportsandimports.Thepriceindexisaweightedaverageofthepricesofmanygoods,calculatedforcomparisonwithabaseyear.

Thebase-yearpriceindicesarethensetatvaluesof100,andotheryearscanbecomparedwiththem.

Overalongperiod,termsoftradeillustrateshowacountry’sshareoftheworldgainsfromtradechangesandgivesaroughmeasureofthefortunesofacountryintheworldmarket.1.7OfferCurveandTermsofTradeOtherConceptsoftheTermsofTrade

IncomeTermsofTradeTOTY=(PX/PM)×QXor(PX×QX)/PMwhereQXisthequantityindexofexports.SingleFactoralTermsofTradeTOTSF=(PX/PM)×OXwhereOXistheproductivityindex.DoubleFactoralTermsofTradeTOTDF=(PX/PM)×(OX/OM)whereOMrepresentstheforeignproductivityindexforthehomecountry’simports.NewClassicalTheoriesofInternationalTradeInternationalEconomicsChapter2Chapter2NewClassicalTheoriesofInternationalTrade2.1SpecificFactorModel2.2FactorEndowmentTheory(H-OModel)2.3OtherNewClassicalTheories2.4LeontiefParadox2.1SpecificFactorModelThespecificfactormodelistoanalyzetheeffectofachangeincommoditypriceonthereturnsoffactorsinacountrywhenatleastonefactorisnotmobilebetweenindustries.Itindicatesthatworkersmaybebetterorworseoff,dependingonpreferences;Itpredictsthatownersoffactorsusedinexportindustriesgainfromtrade,whileownersoffactorsusedinimport-competingindustrieswilllosefromtrade.2.1SpecificFactorModelspecificfactorItsuseisspecifictoeithertheproductionofmachinesortheproductionofclothandcannotmovebetweenindustries.Suchascapitalinthemodel.

mobilefactorItcanmovebetweenmachineproductionandclothproductionovertime.Suchaslaborinthemodel.2.1SpecificFactorModelDM:themachineindustry’sdemandforlabor.DC:theclothindustry’sdemandforlaborW0:equilibriumwage,whichoccurswhenOLlaborisemployedinthemachineindustryandO’Llaborisemployedintheclothindustry.

Asthedemandforlaborinthemachineindustriesincreases,thewageraterisesandworkersmovefromtheclothindustriestothemachineindustries.2.1SpecificFactorModelTheexistenceofspecificfactorscanhelpexplainwhysomegroupsresistfreetrade.Ingeneral,ownersoftheabundantfactorofproductioninacountryshouldbeinfavoroffreetrade.

However,bothcapitalandlaborintheindustrywithacomparativedisadvantagesufferlossesandmaywellresistfreetrade.Chapter2NewClassicalTheoriesofInternationalTrade2.1SpecificFactorModel2.2FactorEndowmentTheory(H-OModel)2.3OtherNewClassicalTheories2.4LeontiefParadox2.2FactorEndowmentTheory(H-OModel)TheRicardianprincipleofcomparativeadvantageexplainswhyspecializationandtradeleadtogainsforproducersandconsumers.Itdoesnot,however,initselfexplainwhytheproductionpossibilitiesfrontiers(PPF)ofdifferentcountrieshavedifferentshapes,andthuswhyacountry’scomparativeadvantageisinoneproductratherthananother.2.2FactorEndowmentTheory(H-OModel)Thefactor-endowmenttheorystatesthatcomparativeadvantageisexplainedexclusivelybydifferencesinrelativenationalsupplyconditions.Inparticular,thetheoryhighlightstheroleofcountries’resourceendowments(suchaslaborandcapital)asthekeydeterminantofcomparativeadvantage.2.2FactorEndowmentTheory(H-OModel)AssumptionsCountriesallhavethesametastesandpreferences(thesameindifferencecurves);Theyusefactorinputswhichareofuniformquality;Theyallusethesametechnology.2.2FactorEndowmentTheory(H-OModel)2.2FactorEndowmentTheory(H-OModel)Insummary,thefactorendowmentmodelassertsthatthepatternoftradeisexplainedbydifferentialsinresourceendowments.Acapitalabundantcountrywillhaveacomparativeadvantageinacapital-intensiveproduct;Whilealaborabundantcountrywillhaveacomparativeadvantageinalabor-intensiveproduct.2.2FactorEndowmentTheory(H-OModel)ImplicationsFactorpriceequalizationTheshiftwithineachcountrytowardsuseofcheaperfactors,andawayfromexpensiveones,leadstomoreequalfactorprices(iffactorsaremobile).DistributionofincomeTradechangesdomesticdistributionofincomeasdemandfordifferentfactorschanges.Chapter2NewClassicalTheoriesofInternationalTrade2.1SpecificFactorModel2.2FactorEndowmentTheory(H-OModel)2.3OtherNewClassicalTheories2.4LeontiefParadox2.3OtherNewClassicalTheoriesRybczynskiTheoremItbasicallysaysthatthewayinwhichacountrygrowshasanimpactontheproductionandtrademixesofthecountry.Countrieswithlowsavingsratesthatinvestlittleinnewplantsandequipmentwilltendtoproduceandtradelabor-intensivegoods.Countrieswithhighsavingsandinvestmentrateswilltendtoproduceandtrademorecapital-intensivegoods.2.3OtherNewClassicalTheoriesTheEffectofanIncreaseinCountryA’sCapitalStockAtconstantworldprices,ifacountryexperiencesanincreaseinthesupplyofonefactor,itwillproducemoreoftheproductwhoseproductionisintensiveinthatfactorandlessoftheotherproduct.2.3OtherNewClassicalTheoriesFactorPriceEqualizationTheoryFreeinternationaltradewillleadtoequalizationofinthereturnstohomogeneousoridenticalfactorsacross.Thetheorypredictsthatsomefactorpaymentswillriseandothersfallwiththeintroductionoftrade.2.3OtherNewClassicalTheoriesGivenalltheassumptionsoftheH-Omodel,freeinternationaltradewillleadtotheinternationalequalizationofindividualfactorprices.

Incountriesthathavehighwagesbeforetradebegins,therewillbetendencyforwagestofall.Incountrieswithinitiallylowwages,tradewillproducetendencyforwagestorise.UnderthestrictassumptionsoftheH-Omodel,thesetendencieswillcontinueuntiltheequalizationofwagesisachieved.Thesamewillbetrueforrentalratesoncapital.2.3OtherNewClassicalTheoriesStolper-SamuelsonTheoremFreeinternationaltradebenefitstheabundantfactorandharmsthescarcefactor.WagesinitiallyhighinCountryAbecauselaborisrelativelyscarceandhencecanexploititsscarcitypowerinthefactormarket.InternationaltrademeansmanufacturersusingscarcelaborinCountryAmustnowcompetewithmanufacturersusingmoreabundantlaborinCountryB.InternationalcompetitivepressurestendtoforcedownwagesinCountryA.Thus,eventhoughlaborisimmobilebetweencountries,itspriceisequalizedthroughcompetitivebiddingforitsservices.2.3OtherNewClassicalTheoriesImplications

First,wenowhaveestablishedareasonforsomegroupsinacommunitytoopposeininternationaltrade.Second,theStolper-Samuelsontheoremprovidesinsightsintowhygovernmentsmayimposebarrierstotrade.Finally,itisimportanttorememberthateventhoughsomeinterestgroupslosefrominternationaltrade,thecountryas