A Model of Trade with Ricardian Comparative Advantage and Intra-sectoral Firm Heterogeneity PDF Download
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Author: Haichao Fan
Publisher:
ISBN:
Category : Corporations
Languages : en
Pages : 33
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Book Description
Author: Haichao Fan
Publisher:
ISBN:
Category :
Languages : en
Pages : 46
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Book Description
In this paper, we incorporate Ricardian comparative advantage into a multi-sector version of Melitz's (2003) model to explain the pattern of international specialization and trade. The model is able to capture the existence of inter-industry trade and intra-industry trade in a single unified framework. Trade liberalization can lead to a "reverse-Melitz outcome" in the two-way trade sectors in which the country has the strongest comparative disadvantage, if the country is sufficiently large or its tariff reduction is sufficiently asymmetric compared with its trading partners. In this case, the productivity cutoff for survival is lowered while the exporting cutoff increases in the face of trade liberalization, leading to reductions in real wage in terms of these goods. This is because the inter-sectoral resource allocation (IRA) effect together with the unilateral liberalization (UL) effect dominate the Melitz selection effect in these sectors. Analyses of data of Chinese manufacturing sectors confirm our hypotheses. Our model can be extended to capture the effect that, in the comparative advantage sector, it is possible that firms that sell domestically have higher average productivity than firms that do not, as documented by Lu (2010) and others.
Author: Haichao Fan
Publisher:
ISBN:
Category : Corporations
Languages : en
Pages : 33
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Book Description
Author: Kwok Tong Soo
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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Book Description
This paper develops a model of international trade with a continuum of countries and sectors, which combines Ricardian comparative advantage and increasing returns to scale. Trade consists of both inter- and intra-industry trade. The model predicts that the trade-weighted Grubel-Lloyd index of intra-industry trade is positively related to the number of exported sectors, and is negatively related to the number of imported sectors. Empirical evidence from a panel of countries using the UN Comtrade database supports these predictions, and the model fits the data better for non-OECD than for OECD countries.
Author: Michael Betz
Publisher: GRIN Verlag
ISBN: 3668257760
Category : Business & Economics
Languages : en
Pages : 97
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Book Description
Master's Thesis from the year 2015 in the subject Economics - International Economic Relations, grade: 2,0, University of Münster (Institute of International Economics), language: English, abstract: While the traditional Trade Theory is merely able to explain trade between developed and less developed countries, the more recent literature of the New Trade Theory allows for capturing trade between countries that are all highly developed. One of its models - the Melitz model of intra-industry trade (2003) - incorporates heterogeneity in firm productivity into a framework based on Krugman (1980). The Melitz model is a corner stone of New Trade Theory models and has been extended in various papers to analyze intra-industry trade with respect to different aspects. One important aspect that is covered intensively in recent literature is the efect of unilateral trade liberalization on a country's welfare. This thesis presents the Melitz model (2003) by firstly illustrating its fundament based onKrugman (1980) and secondly deriving its working mechanisms both for opening for trade as well as for trade liberalization. Further, extensions by Melitz and Ottaviano (2005) and Demidova and Rodriguez-Clarez (2011) will be presented. The thesis concludes by discussing the contribution of the Melitz model to explain occurring trading patterns and its limitations.
Author: Andrew B. Bernard
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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Book Description
This paper examines how country, industry and firm characteristics interact in general equilibrium to determine nations' responses to trade liberalization. When firms possess heterogeneous productivity, countries differ in relative factor abundance and industries vary in factor intensity, falling trade costs induce reallocations of resources both within and across industries and countries. These reallocations generate substantial job turnover in all sectors, spur relatively more creative destruction in comparative advantage industries than comparative disadvantage industries, and magnify ex ante comparative advantage to create additional welfare gains from trade. The relative ascendance of high-productivity firms within industries boosts aggregate productivity and drives down consumer prices. In contrast with the neoclassical model, these price declines dampen and can even reverse the real wage losses of scarce factors as countries liberalize.
Author: Stephen S. Golub
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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Book Description
According to the classical Ricardian theory of comparative advantage, relative labor productivities determine trade patterns. The Ricardian model plays an important pedagogical role in international economics, but has received scant empirical attention since the 1960s. This paper assesses the contemporary relevance of the Ricardian model for U.S. trade. Cross-section seemingly unrelated regressions of sectoral trade flows on relative labor productivity and unit labor costs are run for a number of countries vis-a-vis the United States. The coefficients are almost always correctly signed and statistically significant, although much of the sectoral variation of trade remains unexplained.
Author: Ronald W. Jones
Publisher: Springer
ISBN: 3319606069
Category : Business & Economics
Languages : en
Pages : 273
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Book Description
This book offers a comprehensive and insightful reflection on David Ricardo’s ingenious theory of international trade. Divided into three parts, Part I presents the “birthday boy”, his concept and the many applications and insights that have been derived from it, particularly in modern times. Part II explores in depth important aspects of the Ricardian trade theory through the eyes and experience of leading experts on international trade theory, taking into account the latest research in the field. Lastly, Part III discusses current challenges of globalization in the light of Ricardian trade theory and includes the original "On Foreign Trade" written and published by David Ricardo in 1817.
Author: Nagwa Riad
Publisher: International Monetary Fund
ISBN: 1463973101
Category : Business & Economics
Languages : en
Pages : 87
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Book Description
Changing Patterns of Global Trade outlines the factors underlying important shifts in global trade that have occurred in recent decades. The emergence of global supply chains and their increasing role in trade patterns allowed emerging market economies to boost their inputs in high-technology exports and is associated with increased trade interconnectedness.The analysis points to one important trend taking place over the last decade: the emergence of China as a major systemically important trading hub, reflecting not only the size of trade but also the increase in number of its significant trading partners.
Author: Paul Krugman
Publisher: MIT Press
ISBN: 9780262610865
Category : Business & Economics
Languages : en
Pages : 160
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Book Description
"I have spent my whole professional life as an international economist thinking and writing about economic geography, without being aware of it," begins Paul Krugman in the readable and anecdotal style that has become a hallmark of his writings. Krugman observes that his own shortcomings in ignoring economic geography have been shared by many professional economists, primarily because of the lack of explanatory models. In Geography and Trade he provides a stimulating synthesis of ideas in the literature and describes new models for implementing a study of economic geography that could change the nature of the field. Economic theory usually assumes away distance. Krugman argues that it is time to put it back - that the location of production in space is a key issue both within and between nations.
Author: Daniel Lederman
Publisher: World Bank Publications
ISBN: 0821384910
Category : Business & Economics
Languages : en
Pages : 153
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Book Description
Does what economies export matter for development? If so, can industrial policies improve on the export basket generated by the market? This book approaches these questions from a variety of conceptual and policy viewpoints. Reviewing the theoretical arguments in favor of industrial policies, the authors first ask whether existing indicators allow policy makers to identify growth-promoting sectors with confidence. To this end, they assess, and ultimately cast doubt upon, the reliability of many popular indicators advocated by proponents of industrial policy. Second, and central to their critique, the authors document extraordinary differences in the performance of countries exporting seemingly identical products, be they natural resources or 'high-tech' goods. Further, they argue that globalization has so fragmented the production process that even talking about exported goods as opposed to tasks may be misleading. Reviewing evidence from history and from around the world, the authors conclude that policy makers should focus less on what is produced, and more on how it is produced. They analyze alternative approaches to picking winners but conclude by favoring 'horizontal-ish' policies--for instance, those that build human capital or foment innovation in existing and future products—that only incidentally favor some sectors over others.
