厦大高级贸易

Advanced International Trade II. The Ricardian Model Instructor: Zhiqi Chen chenyu19871025(????????） Administrator 高亮 1. A Simple Model The Ricardian model: S different production technologies among countries S one factor of production: labour S constant returns to scale S identical and homogeneous tastes S perfect competition S the absence of distortions Unit labour requirement: xa : the amount of labour needed to produce one unit of X ya : the amount of labour needed to produce one unit of Y Output levels of X and Y: p x x p y yX = L /a ; Y = L /a . chenyu19871025(????????） Administrator 高亮 Administrator 高亮 Administrator 附注 Absolute value of slope equals opportunity cost of cheese in terms of wine. The production possibility frontier illustrates the different mixes of goods the economy can produce. Administrator 高亮 Administrator 高亮 Administrator 高亮 Administrator 高亮 Administrator 高亮 Administrator 高亮 Administrator 高亮 Administrator 高亮 Administrator 高亮 Administrator 高亮 Administrator 高亮 Administrator 高亮 x yResource constraint: L + L = L2 w: wage rate x yp = p /p relative price of X in terms of Y Autarky x x p y y pSince L = a X , L = a Y , the resource constraint implies: x p y p a X + a Y = L2 The PPF is a straight line with x yslope - a /a chenyu19871025(????????） Administrator 高亮 Administrator 高亮 Administrator 高亮 Administrator 高亮 Administrator 高亮 x yEquilibrium relative price: p = a /aa xCost of producing one unit of X: wa yCost of producing one unit of Y: wa Perfect competition Y firms make zero profits x x y yY p = wa , p = wa , x x y yY w/p = 1/a , w/p = 1/a Real wages are determined by labour productivity chenyu19871025(????????） Administrator 高亮 Administrator 高亮 Administrator 高亮 Administrator 高亮 Administrator 高亮 Administrator 附注 One of the most important sources of error in discussing international trade is to confuse comparative advantage with absolute advantage Trade x yIf p > a /a , the country specializes in X x yIf p < a /a , the country specializes in Y x yIf p = a /a , the country can produce at any point on PPF chenyu19871025(????????） Administrator 高亮 Administrator 高亮 Excess demand curve: chenyu19871025(????????） Administrator 高亮 Administrator 高亮 Consider a two-country world: Country H: as described above; x yCountry F: (a , a , 6L )* * * x y x ySuppose a /a > a /a* * Y H has comparative advantage in Y F has comparative advantage in X x y x yAutarky prices: p = a /a , p = a /aa a* * * Y p > p ; Good X is cheaper in F than in Ha a* Y After trade, H exports Y and F exports X x y x yEquilibrium price p must satisfy: a /a $ p $ a /af f * * chenyu19871025(????????） Administrator 高亮 Administrator 高亮 Administrator 高亮 Administrator 高亮 Complete specialization: both countries gain from trade x y x yNote: a /a > p > a /a Yf * * complete specialization Incomplete specialization: only one country gains from trade; the other country is indifferent between trade and autarky chenyu19871025(????????） Administrator 高亮 Administrator 高亮 Administrator 高亮 Administrator 高亮 Real wages before and after trade x x y yAutarky: w/p = 1/a , w/p = 1/aa a x y x yFree trade with complete specialization: a /a > p > a /a f * * y y y yH specializes in Y. Y p = wa Y w = p /a f f x x x xF specializes in X. Y p = w a Y w = p /af * * * f * Focus on the real wages in H: y yw/p = 1/a : the same as in autarkyf x y y x y x y y x y xw/p = (p /a )/p = (p /p )(1/a ) > (a /a )(1/a ) = 1/af f f f f Y Real wage in terms of import good is higher chenyu19871025(????????） Administrator 高亮 Administrator 高亮 Administrator 高亮 Administrator 高亮 Administrator 高亮 Administrator 高亮 Administrator 高亮 x x y ySuppose a < a and a < a : * * H has absolute advantage in both X and Y y y y x x xThen w/p = 1/a > w /p and w/p > 1/a > w /pf * f f * f Y the real wages are higher in H than in F. Free trade with incomplete specialization: No change in real wages in the country that produces both goods. chenyu19871025(????????） Administrator 高亮 Administrator 高亮 Administrator 删划线 Administrator 删划线 Administrator 高亮 Administrator 高亮 Growth x ySuppose either 6L 8 or both a and a 9 by the same proportion* * * Y F’s PPF shifts out Y for any given p, F wants to increase both export and import In equilibrium, p fallsf chenyu19871025(????????） Administrator 高亮 Administrator 高亮 Administrator 高亮 Administrator 高亮 Administrator 高亮 Y F’s terms of trade deteriorates H’s terms of trade improves H benefits from the growth in F. chenyu19871025(????????） 2. Ricardian Model with a Continuum of Goods (Dornbusch, Fisher and Samuelson, AER 1977) Production # A continuum of goods, index by z 0 [0, 1] # Unit labour requirement in home country: a(z) # Unit labour requirement in foreign country: a (z)* # Domestic and foreign wage: w and w* # Define: # Indexing goods in such a way that AN(z) < 0 # Let z# be such that A(z#) = T # H has comparative advantage in goods in the range [0, z#] # F has comparative advantage in goods in the range [z#, 1] chenyu19871025(????????） Administrator 高亮 Administrator 高亮 Administrator 高亮 Administrator 高亮 Administrator 高亮 Administrator 高亮 Administrator 高亮 Administrator 高亮 Administrator 高亮 Administrator 高亮 Consumption: # Assume constant expenditure share: b(z) = P(z)C(z)/Y # b (z) = b(z)* # Fraction of income spent on goods in which H has comparative advantage: Equilibrium: # Balance of trade condition: [1-v(z#)]wL = v(z#)w L . Then* * Note: chenyu19871025(????????） Administrator 高亮 Administrator 高亮 Administrator 高亮 Administrator 高亮 Administrator 高亮 Administrator 附注 There are three main reasons why specialization in the real international economy is not this extreme: 1. The existence of more than one factor of production reduces the tendency toward specialization. 2. Countries sometimes protect industries from foreign competition. 3. It is costly to transport goods and services, and in some cases the cost of transportation is enough to lead countries into self-sufficiency in certain sectors. Administrator 高亮 Equilibrium (Cont’d): T = A(z#) = B(z#, L /L) determines the equilibrium values of (z#, T) * Equilibrium prices: for z < z# < zN, P(z) = wa(z) and P(zN) = w a (zN) * * Terms of trade: P(z)/P(zN) = Ta(z)/a (zN)* chenyu19871025(????????） Administrator 高亮 Administrator 高亮 Administrator 高亮 Comparative statics: # An increase in L /L* shifts B(z, L /L)* schedule upward: z# falls and T rises # Technical progress. Suppose a (z) falls* for all z Y A(z) schedule shifts downward Y both z# and T falls chenyu19871025(????????） Administrator 高亮 Administrator 高亮 Administrator 高亮 Page 1 Page 2 Page 3 Page 4 Page 5 Page 6 Page 7 Page 8 Page 9 Page 10 Page 11 Page 12 Page 13 Page 14 Page 15 Page 16 未标