Proposition: If all industries have constant returns to scale, the production set is
convex: Any convex combination of two feasible production vectors is also
feasible (in the production set).
: X - vector of outputs
V - matrix of factor use
1. Review of empirical evidence
2. Dunning's OLI, joint inputs, firm versus plant-level scale economies
3. A model with endogenous multinationals
4. Pattern of trade in goods and services
5. Motives for internalization
Trade in Factors
1. A gains-from-trade theorem
2. The Jones-Coelho-Easton two-factor, one-good model.
3. The Heckscher-Ohlin Model: trade in goods and factors as substitutes.
Zero trade costs, specialization
Positive trade costs
Country h large: its share of total world income Sh > 1/2
Country h's share of total world X production (total varieties)
driven by factor
driven by product
Table 8.1 Measures of Factor Intensity for US Manufacturing Industries
Val ue Added
Petrol eum and coal products
C tal , Ski l l
hemi cal products
Table 1: The correlation between the first two columns is 0.94. Average
annual earnings also clearly fall as workers become less productive.
Although the rankings are slightly different, the same conclusions hold for
the PPP-based calculations.