Chap010 - Chapter 10 Post-Heckescher-Ohlin Theories of...

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Chapter 10 – Post-Heckescher-Ohlin Theories of Trade and Intra-Industry Trade CHAPTER 10 POST-HECKSCHER-OHLIN THEORIES OF TRADE AND INTRA-INDUSTRY TRADE Learning Objectives: To understand explanations for the basis of trade in manufactures beyond Heckscher- Ohlin. To appreciate the roles of technology dissemination, demand patterns, and time in affecting trade. To grasp how the presence of imperfect competition can affect trade. To understand the phenomenon known as intra-industry trade. I. Outline Introduction - A Trade Myth Post-Heckscher-Ohlin Theories of Trade - The Imitation Lag Hypothesis - The Product Cycle Theory - The Linder Theory - Economies of Scale - The Krugman Model - Other Post-Heckscher-Ohlin Theories - Concluding Comments on Post-Heckscher-Ohlin Trade Theories Intra-Industry Trade - Reasons for Intra-Industry Trade in a Product Category - The Level of a Country’s Intra-Industry Trade Summary Appendix A: Economies of Scale Appendix B: Monopolistic Competition and Price Elasticity of Demand in the Krugman Model Appendix C: Differentiating among Alternative Trade Theories Using the Gravity Equation Appendix D: Measurement of Intra-Industry Trade 10-1
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Chapter 10 – Post-Heckescher-Ohlin Theories of Trade and Intra-Industry Trade II. Special Chapter Features In The Real World: A Reexamination of the Linder Hypothesis In The Real World: Product Differentiation in Automobiles In The Real World: Geography and Trade III. Purpose of Chapter The purpose of this chapter is to present some newer theories of trade that have emerged in the literature because of the failure of the Heckscher-Ohlin model to explain empirically important parts of world trade, specifically the growing trade in manufactured goods. In addition, because intra-industry trade emerges in some of these newer theories and because such trade is important in the real world, the last part of the chapter briefly surveys possible causes of this phenomenon. IV. Teaching Tips A. The chapter begins with an examination of the empirical evidence related to U.S. imports from Mexico. The initial thought is often that fruits and vegetables or clothing will top the list. In reality, electrical machinery and equipment ranks first and vehicles rank second. These same items top the list of U.S. exports to Mexico. This is certainly not the predicted trade patterns of the traditional models and provides a nice opening to discuss intra-industry trade and several elements of the newer trade theories that emphasize trade in manufactures. B. With respect to the product cycle theory (PCT), Vernon suggested in his original article that the PCT could help to explain the Leontief paradox because when the product was being imported into the United States in the standardized product stage it was more capital-intensive than when it was first introduced and exported by the United States. We have not utilized this point in our discussion because to us it seems incorrect. The relevant comparison would be
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This note was uploaded on 11/27/2009 for the course ECON 421 taught by Professor Macphee,c during the Spring '08 term at UNL.

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Chap010 - Chapter 10 Post-Heckescher-Ohlin Theories of...

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