Knowledge that Transforms

Recent contributions to interrntional trade theory have attempted to introduce new and more concrete elements into traditional explanations of cornparative advantage.Thus Linder [10] has presented the hypothe sis that the volume of trade between two countries is larger the closer they are in terms of per capita income ; this fact being due, according to him , to the export potentiality developed in the two markets by the similar national demand patterns that accompany similar levels of income. Drèze [4], inquiring into the export-import performance of Belgium, advanced the hypothesis that small countries have a comparative advantage in products that are internationally standardized and subject to economies of scale. In fact, only large markets would allow exploitation of economies of scale ; thus, only large countries are able to produce efficiently products having national characteristics that differentiate them from foreign products, when their production entails economies of scale. On the other hand, the market for internationally standardized products is world-wide and small countries are, in it , on the same footing as large ones. This would give them a comparative advantage to specialize their production into the latter products, export them and import the former products.

Demand and Price Analysis, Marketing

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The purpose of this paper is to investigate in detail the long-run supply responses of capital and their implications for the classical propositions. We focus on the behavior of a two-country model in which the long-run rate of interest in each country is fixed, for example, by the pure rate of time preference in the case of "rational" savings behavior, or by the savings behavior of capitalists if workers save nothing. After setting up the basic model in Section I, and analyzing the pre-trade equilibrium in Section II, we investigate the long-run free-trade equilibrium in Section III. In Section IV, we show that, because the high interest rate (high time preference) country is willing to trade future consumption for present consumption with the low interest rate country, it always has a lower long-run consumption with free trade than pre-trade, and conversely for the low interest rate economy. In Section V, the patterns of specialization are investigated. Section VI considers the effects of trade policy on the long-run equilibrium; it is shown that a tariff (export subsidy) may lead to a higher consumption per capita in both countries. Section VII considers some extensions of the analysis. In the Appendix, the nature of the dynamic path is analyzed.

Michael Bruno, Edwin Burmeister, Eytan Sheshinski; Switching of Techniques and Consumption Per Head: An Economic Clarification, The Quarterly Journal of Ec

I. Introduction, 161. — II. The discrete time model, 162. — III. Definitions, 162. — IV. Some theorems on the linear stochastic model, 163. — V. Application to Walrasian and Marshallian stability, 164. —VI. Conclusion, 166.

I. The basic model, 217. — II. Multiplicative demand curves and steady growth expectations, 222. — III. Equilibrium solutions, 226. — IV. Nonconstant returns to scale, 230. — V. Rule-of-thumb decision making and steady growth solutions, 232. — VI. Summary and conclusions, 234.