Neo-classical and Contemporary Trade Theories Flashcards
PLCT of trade: as the technology producing the product become more widespread, production will spread to other nations which can lead to
standard comparative advantage framework
Porter’s diamond of nation advantage focuses on four conditions:
- factor conditions
- demand conditions
- related and supporting industries
- firm strategy, structure, and rivalry
advantages of agglomeration
- potential technology knowledge spillovers
- market power
- assoc. region of applicable labor force
market life span stages the product goes through in international markets sequentially, simultaneously, or asynchronously
International Product Life Cycle (IPLC)
HO theory was developed by ____ and ____ in 1920s
Eli Heckscher and Bertil Ohlin
Argument of Porter
a nation attains competitive advantage if its firms are competitive
disadvantage of agglomeration
- potential poaching of employees by rivals
- increase in competition (decrease mark ups)
if you hold output prices constant as the amount of a factor of production increases, then supply that uses this factor intensively increases, other goods decrease.
Rybczynski Theorem
sequential stages of IPLC
- introduction
- growth
- maturity
- decline
- extinction
TGM by
Posner 1961
IPLC: reasons on the introduction of high-income and labor-saving products to rich nations.
- great opportunities
- development of product needs consumer feedback
- there is a need to provide service
trade based on DTD dynamic technological difference
technological gap model
in real world, why do factor price equalization do not exist?
- countries may produce different goods.
- countries have different technology available.
- ignores trade barriers and transportation costs
in SS theorem, any change in the relative price of goods alters the
distribution of income
PLCT of trade
Raymond Vernon 1966
a great deal of the trade among industrialized countries is
based on the introduction of new products and new production processes
countries have different _____ of factors of production
relative abundance
PLCT of trade stresses on
standardization process
if producers can substitute one input for another in the production process, then PPF is
curved (bowed)
argues that trade occurs due to differences in labor, labor skills, physical capital, capital, or other factors of production across countries.
Heckscher-Ohlin Theory
it is the generalization and extension of technological gap model
product life cycle theory of trade
if the relative price of a good increases, then the real wage or rental rate of the factor used in the production of that good increases, while the real wage or rental rate of other factor decreases.
Stolper-samuelson theorem
diamond as a system
if the elements in the diamond are increasingly present, trade increases
TGM provides innovating firm and nation a _________ through _______ to stimulate the flow of inventions.
temporary monopoly, patents and copyrights
