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1、Lecture04THE-Lecture04THE-HECKSCHER-OHLIN-HECKSCHER-OHLIN-THEORY(THEORY(国际经济学国际经济学) )AssumptionsA13. (in place of A11) Two factors of production: labor (L) and capital (K). Rentals (R) paid to capital (K), wages (W) paid to labor (L).A14. Identical technologies of production in two countries. The ac
2、tual choice of production technique in each country depends on factor prices in each country. E.g., cheap labor labor intensive techniqueKuanqi Du nust 2003A15. T is labor intensive and S is capital intensive.In both A and B, for given wage and rental, T always uses more labor (relative to capital)
3、than S. Kuanqi Du nust 2003A16. A is capital abundant, B is labor abundant. Note: Factor endowment is defined for countries and factor intensity is defined for industries.Kuanqi Du nust 2003SSTTCountry ACountry BThe shape of the PPFKuanqi Du nust 2003Adding the Demand SideA17. Identical tastes Ident
4、ical demand conditionsThe combination of PPF and Indifference curves produces autarky equilibrium.Q: Find and compare the autarky RPs in the two countries. Which country has comparative advantage in S?Kuanqi Du nust 2003Autarky EquilibriumKuanqi Du nust 2003The Heckscher-Ohlin TheoremA country has c
5、omparative advantage in the product whose production is intensive in the factor with which that country is abundantly endowed. Application:Country A is capital abundant.Product S is capital intensive. Then, A has comparative advantage in S as it has a lower RP of S than B does.Kuanqi Du nust 2003Equ
6、ilibrium with TradeIn AIn B Initial conditionComp Adv.STRP of SlowhighWith TradeRP of S rises fallsProduction of Sincreases decreasesProduction of Tdecreases increasesKuanqi Du nust 2003Figure 4.04a Trade equilibrium in the HO modelKuanqi Du nust 2003Figure 4.04b Trade equilibrium in the HO modelKua
7、nqi Du nust 2003Figure 4.04 Trade equilibrium in the HO modelKuanqi Du nust 2003Figure 4.05c,d Reciprocal demand in the classical and HO modelsKuanqi Du nust 2003Figure 4.03 The effect of rising world prices of good S on country As tradeKuanqi Du nust 2003Figure 4.06 The importance of assuming ident
8、ical tastesKuanqi Du nust 2003Incomplete SpecializationIn the H-O model, OC of S rises as its production increases. It results in incomplete specialization.Q: Discuss why A will not increase the production of S any further.Kuanqi Du nust 2003Trade equilibrium in the Classical Model Kuanqi Du nust 20
9、03The Three Theorems1.The Factor Price Equalization Theorem2.The Stolper-Samuelson Theorem3.The Rybczynski TheoremKuanqi Du nust 20031. The Factor Price Equalization TheoremFree trade leads to the international equalization of individual factor prices.in Ain BInitial WageshighlowrentslowhighWith tra
10、deWagesfallsrisesrentsrisesfallsWages are equalized across countries even if there is no international mobility of labor.Free trade is a substitute for free mobility of productive factors. Kuanqi Du nust 2003Why does the FPE not hold in reality?1.Trade is not free.2.There are barriers, natural and m
11、an-made.3.Productivities are different. Technologies are different.Kuanqi Du nust 20032.The Stolper-Samuelson TheoremFree trade benefits the abundant factor and harms the scarce factor.In A, abundant in capital, rents rise while wages fall with trade. This benefits capital owners (the abundant facto
12、r) and hurts workers (the scarce factor). In B, the opposite happens.Kuanqi Du nust 2003Political Economy of TradeWho will be more likely to oppose free trade?a.the owners of scarce factors of production b.the producers of import-competing productsc.the consumers of export productsWho will be free t
13、raders?a.the owners of abundant factors of production b.the producers of export productsc.the consumers of import productsQ: Does a country as a whole gain? How can we show it?Kuanqi Du nust 20033. The Rybczynski Theorem If a country experiences an increase in the supply of one factor, it will, at c
14、onstant world prices, produce more of the product intensive in that factor and less of the other product.Kuanqi Du nust 2003Some Exercises24Australia is land abundant; India is labor abundant. Wheat is land intensive relative to textiles. 1.Once trade starts, what factor(s) gains in Australia? 2.Wha
15、t groups of people will be against trade in India? Mention 3 groups.3.Does India gain from trade for the country as a whole? 254.Graphically demonstrate the pre- and post-trade equilibrium between these two countries. In your diagram, be sure to put wheat on the X axis and textiles on the Y axis. Ma
16、rk the pre-trade equilibrium with “A” and post-trade production with “B” and post-trade consumption with “C”.26DefinitionsLet Kj and Lj denote the capital and labor stocks of country j (j = A, B), then A is said to be capital abundant relative to B if _.According to the Heckscher-Ohlin (HO) model th
17、e source of comparative advantage is a countrys _.27In the HO model, the production possibility frontier is bowed out due to the assumption of _.According to the factor price equalization theorem, if A is labor abundant, then once trade opens wages should fall and rents should rise in A. T/F? 28结束结束
