CHAPTER5TheStandardTradeModel*Thedifferencesandcommonfeaturesofthethreemodelsdevelopedinpreviouschapter.·Differences·Commonfeatures(1)differentPPF(2)differentPPFdifferentRS(3)differentRSdifferentPC/PFtrade*Amoregeneraltrademodel:themodelswehavestudiedmaybeviewedasspecialcases.·DifferentPPF?(1)Home’srelativelaborproductivityofclothishigherthanForeign’sor(2)QC=QC(K,LC),QF=QF(T,LF).HomehasmorecapitalwhileForeignhasmoreland.or(3)Homeislabor-abundantandclothislabor-intensive,while…ModelMeritDefectTheRicardianmodelTechnology(tradepattern)IncomedistributionTheSpecificfactormodelIncomedistributionTradepatternTheH-OmodelResources(tradepattern)Technology·DifferentPc/PF?AtanygivenPc/PF,(QC/QF)>(QC*/QF*),RSliestotherightofRS*,thatis(PC/PF)H<(PC/PF)F。§1.AStandardModelofaTradingEconomyThestandardtrademodelderivesaworldrelativesupplycurvefromproductionpossibilitiesandaworldrelativedemandcurvefrompreferences.1.ProductionpossibilitiesandrelativesupplyAtanygivenPC/PF,everycountrywillmaximizethevalueofoutput.TheproductionpointiswherethePPFistangenttothehighestreachableisovalueline.isovalueline:PCQC+PFQF=VorQF=V/PF−(PC/PF)QCFigure5-1ProductionpointsQandQ*decideQC﹑QF、QC*、QF*,thendecidetheworldrelativesupplyofcloth:(QC+QC*)/(QF+QF*)AtanygivenPC/PF,wecanderiveRS.Figure5-22.RelativepriceanddemandAtanygivenPC/PF,eachcountrywillmaximizeitsnationalwelfare.Theconsumptionpointiswherethehighestisovaluelineistangenttothehighestreachableindifferencecurve.Figure5-3ConsumptionpointsDandD*decideDC﹑DF、DC*、DF*,thendecidetheworldrelativedemandofcloth:(DC+DC*)/(DF+DF*)AtanygivenPC/PF,wecanderiveRD.WorldequilibriumiswhereRSequaltoRD,thus,theworldrelativepriceisdetermined.(Thetermsoftradeisdetermined).3.ThewelfareeffectofchangesinthetermsoftradeAriseinthetermsoftradeincreasesacountry’swelfare,whileadeclineinthetermsoftradereducesitswelfare.(reachthehigherindifferencecurve)Figure5-4§2.EconomicGrowth:AShiftoftheRSCurve1.Manyimportantissuesininternationaleconomicswhoseanalysecanbedonewiththestandardtrademodel:(1)Economicgrowth:ashiftofRS(2)Internationaltransferofincome:ashiftofRD(3)Tariffandexportsubsidies:shiftofRSandRDAllthesechangethetermsoftrade2.Biasedgrowth,relativesupply,termsoftrade,nationalwelfare·Theinternationaltradeeffectsofgrowthresultfromthefactthatsuchgrowthtypicallyhasabias.Growthmaybebiasedfortwomainreasons:(1)technologicalprogressinonesector(2)thesupplyofafactorofproductionincrease·Foranygivenrelativepriceofcloth,growthbiasedtowardclothwillleadtoariseintheoutputofclothrelativetothatoffood(Figure5-6).Thenfortheworldasawholetheoutputofclothrelativetofoodwillalsorise(Figure5-7).Figure5-6Figure5-7·IfthegrowingcountryisHome(thecountryexportcloth),growthisexport-biasedgrowth;IfthegrowingcountryisForeign(thecountryinportcloth),growthisimport-biasedgrowth.Thus,ouranalysisleadtothefollowingconclusion:Export-biasedgrowthtendstoworsenthegrowingcountry’stermsoftrade,tothebenefitoftherestoftheworld;import-biasedgrowthtendstoimprovethegrowingcountry’stermsoftradeattherestoftheworld’sexpense.·Toexport-biasedgrowth,ifthedeclineofthewelfarecausedbythedeteriorationofthetermsoftradeswapovertheriseofthewelfarecausedbygrowth,thegrowthisimmiserizinggrowth.Conditions:(1)economicgrowthisstronglyexport-biased(2)thegrowingcountryislargeenoughtoaffecttheworldprice(3)RSandRDmustbeverysteepCasestudy...
