第6章Alternative_Theories_of_Trade.pptVIP

Scale economies, imperfect competition, and trade Alternative Theories of Trade Three major alternatives: product differentiation, Monopolistic competition Global oligopoly Industrial cluster Scale Economies (increasing returns to scale) Scale economies Constant returns to scale Internal scale economies External scale economies Trade based on economies of scale Intra-industry Trade Inter-industry trade ; Intra-industry Trade: Two-way trade Net trade=Xi－Mi Intra-industry trade (IIT) share IIT share=1－ Intra-industry trade share 0＜IIT share ＜1 X=0 or M=0, IIT share=0, all trade is inter-industry trade. X=M, IIT share =1, all trade is intra-industry trade The basis for trade Product differentiation (demand) Scale economies( supply) Income and product variety Net trade The monopolistic competition The monopoly element: price setting The competition element: entry and profit erosion A monopolistic competitive company in a market Before trade opens A monopolistic competitive company in a market After opening trade Gains from trade The increase in the number of varieties of products. Lower prices of domestic varieties. Effects on the well-being of different groups: Little impact on the domestic distribution of factor income Variety offsets any losses in factor income resulting from inter-industry trade. Oligopoly and International Trade Substantial scale economy History; scale economy Oligopoly pricing Game theory Prisoner’s dilemma Collusion Anti-trust External Scale Economies and Trade Price ($ per unit) Growth and Trade Economic growth The changes in productive capabilities (economic growth). Two sources: Increases in countries’ endowments of factors Improvements in technologies. Two odd effects: The increase in one factor some products decline Expand export the country worse off Balanced versus biased growth Balanced growth : increases in the endowments of all factors by the same proportion; technology improvements of a