BAR11S.8IE_1 - Dr. Christine M. Shaw [BAR11S.8IE]...

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Dr. Christine M. Shaw [BAR11S.8IE] International Economics Outline for Week 4 I. Week 3 “highlights” II. Factor price equalization A. A corollary to the H-O model that has to do with the relative prices of a country’s factors of production when it shifts from a no-trade to a trade situation B. Post-trade → in each country → there is going to be 1. A rise in the price of the abundant factor 2. A fall in the price of the scarce factor C. This result – and the concerns it generates about loss of jobs in high wage economies – dominates “popular” trade policy discussions III. Other ways to explain trade flows A. Tastes 1. One theory argues that trade is due to differences in tastes 2. Steffan Linder and “overlapping demands” a. Reverse argument to explain trade b. Linder claims that countries that are alike – and hence have similar tastes – will serve as each others’ markets B. Intra-industry trade 1. Based on empirical observation of trade flows 2. US exports Dell and Compaq computers to Japan and imports NEC and Toshiba computers from Japan 3. Might be due to production cost considerations or transport costs (Seattle- Vancouver versus Vancouver-Quebec) or consumer tastes C. Product cycle theory 1. This is a theory developed by Raymond Vernon and is particularly relevant today to developing economies 2. Some product is developed and shows export potential 3. Out-source its production 4. Another country gains the necessary know-how to produce this product → becomes competitive in the manufacture of the good → firms start to
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This note was uploaded on 04/17/2011 for the course ECON 3250 taught by Professor Shaw during the Spring '11 term at CUNY Baruch.

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BAR11S.8IE_1 - Dr. Christine M. Shaw [BAR11S.8IE]...

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