Econ10.27.10 - Tung/Wan: Comparative Advantage Trade models...

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Tung/Wan: Comparative Advantage Trade models typically build on Arrow-Debreu-Mckenzie general equilibrium model Real World: issue is sequencing (ADM: all is automatic, unfolding from initial setup) -free riding (fail: first comer pays cost, succeed: second comer reaps benefits) Opening of markets to new goods, new methods, new locations but don’t know prices Past: sequencing not so important because slow change-how: rapid change Role for industrial policy is cost discovery (or in Rodrik’s term, coordination and information) New good…cascades, indirect effects Three examples: Korea, Taiwan, Singapore Korea: patriotic stance, national champions with policy loans Outcompete: Japan DRAM fabrication Acquired advantage: ability to choose Taiwan: national consciousness and avoided favoring the rich -local entrepreneurs Former employees of ACER form Asustek Acquired advantage: ability to adapt Singapore: double digit unemployment rate when it separated from Malaysia Attract high-wage employers->Seagate Acquired advantage: highly educated workforce HK: 1997 return to PRC, laissez faire Industrial policy watched the political agenda Policy opens a new industry (high-tech, high entry barrier) Fulfilled two criteria 1. post intervention situation more beneficial to economy than pre-intervention
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This note was uploaded on 04/06/2011 for the course ECON 343 taught by Professor Miyao during the Fall '08 term at USC.

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Econ10.27.10 - Tung/Wan: Comparative Advantage Trade models...

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