02 trade theory

Information about 02 trade theory

Published on January 22, 2008

Author: Dolorada

Source: authorstream.com

Content

Commerce and Coalitions:  Review of International Trade Theory Commerce and Coalitions Comparative Advantage:  Comparative Advantage 1. Comparative advantage –› trade 2. Gains from trade in an industry 3. Effects of a tariff 1. Comparative Advantage → → Trade:  1. Comparative Advantage → → Trade Different productivity Different technology Different factor endowments Definition: Lower relative price (not necessarily absolute) Comparative Advantage:  Comparative Advantage Technology: 1 K + 2 L = 1 Textile 2 K + 1 L = 1 Iron Factor endowments: Australia has 4 K and 2 L (2 iron or 1 tex) Bulgaria has 2 K and 4 L (2 tex or 1 iron) Example: Common technology, different factor endowments: Comparative advantage:  Comparative advantage Iron Textiles A B W PA: Iron = 1/2 Textile PB: Iron = 2 Textile PWorld: 1 Iron = 1 Textile 2 1 1 2 Conclusions::  Conclusions: Trade improves welfare because higher indifference curves become reachable Trade lowers price of Textiles in capital-rich country A, hurting laborers Trade lowers price of Iron in labor-rich country B, hurting capital owners Intuition: Scarcity → High price. Trade reduces scarcity 2. Gains from trade in an industry Importing country (PD > PW):  2. Gains from trade in an industry Importing country (PD > PW) Q P S D PD QD PW QCW QPW PD: Domestic price PW: World price 2. Gains from trade in an industry Importing country (PD > PW):  2. Gains from trade in an industry Importing country (PD > PW) Q P S D PD QD PW QCW QPW Value of imports 2. Gains from trade in an industry Importing country (PD > PW):  2. Gains from trade in an industry Importing country (PD > PW) Q P S D PD QD PW QCW QPW Consumer gains: QD (PD - PW) + 1/2 (QCW - QD)(PD - PW) Consumer gain 2. Gains from trade in an industry Importing country (PD > PW):  2. Gains from trade in an industry Importing country (PD > PW) Q P S D PD QD PW QCW QPW Producer loss: QPW (PD - PW) + 1/2(QD - QPW)(PD - PW) Welfare Gains > Losses Producer loss 2. Gains from trade in an industry Exporting country (PD < PW):  2. Gains from trade in an industry Exporting country (PD < PW) Q P S D PD QD PW QPW QCW Value of exports PD: Domestic price PW: World price 2. Gains from trade in an industry Exporting country (PD < PW):  2. Gains from trade in an industry Exporting country (PD < PW) Q P S D PD QD PW QPW QCW Producer gain: QD (PW - PD) + 1/2(QPW - QD)(PW - PD) Producer gains 2. Gains from trade in an industry Exporting country (PD < PW):  2. Gains from trade in an industry Exporting country (PD < PW) Q P S D PD QD PW QPW QCW Consumer loss: QCW (PW - PD) + 1/2(QD - QCW)(PW - PD) Consumer loss Welfare Gains > Losses 2. Gains from trade in an industry:  2. Gains from trade in an industry Conclusions: - Trade increases welfare - Winners and losers - Compensation? Importing country Exporting country P P Q Q S D S D Pl Cg Cg Pg Cl Pg 3. Effects of a tariff:  3. Effects of a tariff Q P S D PD PW QCW QPW PD: Domestic price PW: World price Imports with no tariff PT PT: Price with tariff QPT QCT Imports with tariff 3. Effects of a tariff:  3. Effects of a tariff Q P S D PD PW QCW QPW Consumer loss: A + B + C + D Imports with no tariff PT QPT QCT Imports with tariff A B C D 3. Effects of a tariff:  3. Effects of a tariff Q P S D PD PW QCW QPW Imports with no tariff PT QPT QCT Imports with tariff Gains: Producer gains: A A Government gains: C C Welfare loss: B D B + D Why not compensate the losers?:  Why not compensate the losers? Concentrated costs, diffuse benefits Incentives to defect Economic change shifts political power Bargaining Why bother? Stolper-Samuelson:  Stolper-Samuelson Intuition: scarcity -> high price Factors of production that are more scarce domestically than globally have a higher price in the absence of trade Domestically abundant factors are more valuable if there is trade Domestic coalitions should depend on which factors are abundant Trade and Cleavages:  Trade and Cleavages Change occurs when: Trade increases (transport costs decrease) Relative factor endowments change (development: K increases) Land-Labor ratio Low K High K High (land) Low (land) (class conflict) (urban- rural) (urban- rural) (class conflict)

Related presentations


Other presentations created by Dolorada

ecommerce
07. 05. 2008
0 views

ecommerce

piazza02
08. 05. 2008
0 views

piazza02

North copywrite
06. 05. 2008
0 views

North copywrite

igrid2002presentatio ns
02. 05. 2008
0 views

igrid2002presentatio ns

Chapter 15 SprtsMrktng
02. 05. 2008
0 views

Chapter 15 SprtsMrktng

FRANCESCOARMATO
30. 04. 2008
0 views

FRANCESCOARMATO

cig
24. 04. 2008
0 views

cig

simon jeffrey
22. 04. 2008
0 views

simon jeffrey

Ballew 10 Mar23
21. 04. 2008
0 views

Ballew 10 Mar23

Yellowstone National Park
17. 01. 2008
0 views

Yellowstone National Park

ecotv 6june
09. 01. 2008
0 views

ecotv 6june

Healthy Building Maintenance
10. 01. 2008
0 views

Healthy Building Maintenance

Proposed RCEs in India
15. 01. 2008
0 views

Proposed RCEs in India

Chapter 3 Slides
22. 01. 2008
0 views

Chapter 3 Slides

Colonizing the Southern Colonies
22. 01. 2008
0 views

Colonizing the Southern Colonies

marteproject
24. 01. 2008
0 views

marteproject

vasilas
07. 02. 2008
0 views

vasilas

pabrai 1 2
11. 02. 2008
0 views

pabrai 1 2

S8 11
19. 01. 2008
0 views

S8 11

29591
25. 01. 2008
0 views

29591

Word 04
28. 01. 2008
0 views

Word 04

monsoon wedding
29. 01. 2008
0 views

monsoon wedding

3116ENG
28. 01. 2008
0 views

3116ENG

Tracy
30. 01. 2008
0 views

Tracy

realtime
06. 02. 2008
0 views

realtime

DLSE Child Labor 2005
06. 02. 2008
0 views

DLSE Child Labor 2005

Phosphorus Nelson
07. 02. 2008
0 views

Phosphorus Nelson

lightingppt
03. 03. 2008
0 views

lightingppt

foodborne hazardous foods
29. 01. 2008
0 views

foodborne hazardous foods

The Jamestown Colony
03. 03. 2008
0 views

The Jamestown Colony

nature roman mythology
10. 03. 2008
0 views

nature roman mythology

whm
11. 03. 2008
0 views

whm

ch09 sec2
12. 02. 2008
0 views

ch09 sec2

ErgoBasicPrinslides
05. 03. 2008
0 views

ErgoBasicPrinslides

sym12 27h
16. 03. 2008
0 views

sym12 27h

floor warden
17. 01. 2008
0 views

floor warden

file 34805399
25. 03. 2008
0 views

file 34805399

Depart Slideshow08
24. 01. 2008
0 views

Depart Slideshow08

45 45775
18. 04. 2008
0 views

45 45775

HMIC
21. 04. 2008
0 views

HMIC

TaskB4 PlanetaryGeodesy
11. 01. 2008
0 views

TaskB4 PlanetaryGeodesy

heartofdarkness
16. 01. 2008
0 views

heartofdarkness

jc prs
09. 01. 2008
0 views

jc prs

fractalmusic
15. 01. 2008
0 views

fractalmusic

111 CH3 LCT 7 emp form
16. 01. 2008
0 views

111 CH3 LCT 7 emp form

monasticism
18. 01. 2008
0 views

monasticism

sport aggression
17. 04. 2008
0 views

sport aggression

In the Land of War Canoes
17. 01. 2008
0 views

In the Land of War Canoes

Apresentacao 1
24. 03. 2008
0 views

Apresentacao 1

07091802
16. 04. 2008
0 views

07091802

DELLrevolution
04. 02. 2008
0 views

DELLrevolution

Potlatch UAMfinallast
13. 02. 2008
0 views

Potlatch UAMfinallast

1 Opportunities
23. 01. 2008
0 views

1 Opportunities

neuwolfspongebob
07. 02. 2008
0 views

neuwolfspongebob

ourand fridie golinker csun 03
15. 01. 2008
0 views

ourand fridie golinker csun 03

nips gg
27. 02. 2008
0 views

nips gg

Relationship Decision making
07. 02. 2008
0 views

Relationship Decision making

puppetshows
10. 01. 2008
0 views

puppetshows