The theorems of international trade in time-phased economies

Numerous recent studies conclude that the basic results of the Heckscher-Ohlin theory are vitiated by ‘capital’: a collection of heterogeneous produced means of production. where production takes time and the interest rate is positive. This paper examines the sensitivity of the four basic theorems to the presence of capital and concludes that all four are impervious. The pessimistic conclusions permeating the literature are consequently due not to the nature of capital but rather to other departures from the two-by-two neoclassical model, departures that can be handled fully in a timeless context and, for the most part, have been.     

Market access, economic geography and comparative advantage: an empirical test

Traditional neoclassical models of comparative advantage suggest that, all else equal, a country with idiosyncratically strong demand for a good will be an importer of that good. However, there is a contrary tradition that emphasizes the advantages of a large home market as a foundation for exports of a good. One recent formalization of this home market approach falls within what is termed the new economic geography. This paper integrates core models of Heckscher-Ohlin and Krugman [American Economic Review 70 (1980) 950] to investigate whether such home market effects matter empirically in manufacturing for a set of OECD countries. The evidence suggests that home market effects are important for a broad segment of OECD manufacturing.     

New goods and the skill premium

In a two-cone Heckscher-Ohlin model with CES preferences and a continuum of goods, new northern goods increase the northern skill premium if they are skilled-labor intensive, and may increase the premium if they are unskilled-labor intensive. Thus, the introduction of new goods into US technology could have done more to increase the US skill premium than a closed-economy model would predict. I also explore how new northern goods affect the southern skill premium and what happens if they generate preference-induced reversals across existing goods. I develop a two-step solution method that simplifies comparative static analyses in the two-cone Heckscher-Ohlin model.     

International trade and unemployment: Theory and cross-national evidence

We present a model of trade and search-induced unemployment, where trade results from Heckscher-Ohlin (H-O) and/or Ricardian comparative advantage. Using cross-country data on trade policy, unemployment, and various controls, and controlling for endogeneity and measurement-error problems, we find fairly strong and robust evidence for the Ricardian prediction that unemployment and trade openness are negatively related. This effect dominates the positive H-O effect of trade openness on unemployment for capital-abundant countries, which turns negative for labor-abundant countries. Using panel data, we find an unemployment-increasing short-run impact of trade liberalization, followed by an unemployment-reducing effect leading to the new steady state.     

Making the Shift: Moving from "Ethics Pays" to an Inter-Systems Model of Business

For several decades, business has operated according to the tenets of neoclassical economic theory, where the primary obligation of corporations is to maximize profit for shareholders. However, the larger social mandate for business has changed, represented by the rise of language such as "sustainable development", "corporate social responsibility" (CSR) and "stakeholder groups." Nevertheless, the theoretical shift implied by the use of such language has not occurred. Issues of sustainable development and CSR continue to be justified in the terms of neoclassical economic theory through the rationalization of "doing well by doing good".Within this economic paradigm, CSR cannot move beyond enlightened self-interest (acting in socially responsible ways in order to further one's own ends) because all behavior must be justified economically. This implies that corporate socially responsible behavior will simply cease when it becomes uneconomic, regardless of the impact on interrelated systems which in turn will re-impact the business realm.Faced with bitter realities arising from complex interactions among social, political, cultural, eco-nomic and natural environments, we may better comprehend and negotiate these problems by moving out of a neoclassical economic justification of the stakeholder model of the corporation to an inter-systems model, shifting from a narrow comprehension of a single economic independent system analyzed apart from its larger context to a fuller understanding of business as one of a number of interrelated systems.Operational differences between the old and new mandates are described, and two ways to practically shift towards the new mandate are identified as a modified version of scenario planning and the introduction of the voice of the critic.     

Vertical Specialization Between Developed and Developing Countries: A Modification of the Heckscher-Ohlin Model

This article analyzes the implications for the Heckscher-Ohlin model of a split of the production of a final good into the intermediate good production and the further working of the good. Through this split, the different parts of the production process can be matched to fit the factor endowment of each country. The new and quite central distinction from earlier contributions is that we take into account an exactly defined need of intermediate goods according to a certain kind of specification in every link of the production process. We show that the potential trade pattern thereby becomes much more varied and significantly distinct from the traditional Heckscher-Ohlin model. The input-output ratio of labor increases relatively to the input-output ratio of capital in the capital-abundant country's production of the capital-intensive split product and thereby the Rybczynski theorem is reinforced.     

A critical evaluation of Etzioni's socioeconomic theory: Implications for the field of business ethics

Given the pervasive influence of neoclassical economic theory on the field of business, the opposition of the standard economists to the inclusion of moral factors in economic decisions provides an intellectual resistance to the ideas of many business ethicists. Etzioni (1988) offers a theoretical alternative to the neoclassical model, an alternative that includes a moral dimension. This article: (1) highlights the differences between Etzioni's proposed model and the neoclassical economic paradigm; (2) describes and critically evaluates Etzioni's proposed theory in view of his objective of synthesizing the neoclassical paradigm with a duty-based morality; and (3) discusses the implications of Etzioni's proposed paradigm for the field of business ethics.Diane Swanson is an Assistant Professor of finance and economics at Robert Morris College in Pittsburgh, Pennsylvania. She is also a doctoral student in Business Environment and Public Policy at the Katz Graduate School of Business, University of Pittsburgh.     

What drives long-term capital flows? A theoretical and empirical investigation

What drives capital inflows in the long run? This paper illustrates how capital movements conform surprisingly well to the predictions of a neoclassical model with credit constraints. The most intriguing prediction of this class of models is that, contrary to a pure neoclassical model, domestic saving should act as a complement rather than a substitute to capital inflows. Nevertheless, this class of models keeps the neoclassical prediction that capital should flow to countries where it is most scarce. Using foreign debt data from 1970 to 1998, I find qualitative and quantitative evidence that supports these predictions.     

Efficiency wages,unemployment and international factor movements

"This paper examines the implications of unemployment resulting from efficiency wages for international factor movements in a standard Heckscher-Ohlin model where the relative size of the endowments of skilled and unskilled workers and the efficiency wage induced unemployment level in the unskilled labour market are simultaneously determined given the population, supply of capital and its distribution in the economy.... It is shown that the optimum labour inflow in the market with domestic distortion and the optimum capital inflow are always positive because they reduce the severity of distortion by raising employment and income for the residents. The income and employment of foreigners also increase. Under this situation the optimum labour or capital outflow on the other hand is always zero. These conclusions directly contradict the result obtained for international factor movements in the presence of exogenously determined unemployment."     

Neoclassical theories of stationary relative prices and the supply of capital

In the traditional versions of the neoclassical theory of value and distribution, the stock of existing capital, understood as either an amount of value or an endowment of capital goods, was taken as given together with the available quantities of labour and natural resources. This characteristic of the early neoclassical theories is analysed through comparison with the modern neo‐Walrasian models of stationary equilibrium, where the stock of capital is not among the givens. It is shown here that the attempt to present capital as a factor of production on a par with labour and land led the early neoclassical authors to write the zero‐net‐accumulation condition, which was required by the stationarity of relative prices, in the form of a market‐clearing condition for the supply of and demand for capital. The rate of interest was therefore understood as the price determined by this market. As is known, however, the view of capital as a factor of production and the rate of interest as the price for its use failed to work and involved several problems, some of which are discussed here.     

The Heckscher-Ohlin and Travis-Vanek theorems under uncertainty

The Heckscher-Ohlin theorem is valid under uncertainty of the special benchmark sort modelled by Helpman-Razin. Their pessimism over its validity is vanquished by more structure: rational expectations are imposed on consumers and identical and constant relative aversion to income risk is assumed. Under these circumstances, with free commodity trade, the Heckscher-Ohlin theorem holds for the international exchange of equities.     

Productivity and externalities: models of export-led growth

In developing countries, successful export-led growth (ELG) industrialization has been associated with rapid structural change and productivity growth. There are major difficulties in explaining this performance using a standard neoclassical growth model. To develop a more satisfactory framework, we start from empirical and theoretical work with models incorporating externalities. We develop a simple analytical model with an export externality that captures the large increase in both total factor productivity and trade share associated with ELG. A second model is developed to decompose growth into various components: (i) factor accumulation, (ii) a factor reallocation effect from moving factors from low to high productivity sectors, (iii) an export externality effect arising from exporting light and heavy manufactures and (iv) an import externality effect arising from importing capital goods (heavy manufactures). The second model is implemented with data for an archetype semi-industrial country. In addition to accounting for the higher total factor productivity growth observed in countries pursuing ELG strategies, the model captures the patterns of structural change experienced by such countries better than simpler neoclassical models without disequilibrium features or externalities.     

Efficiency wages,unemployment and international factor movements

This paper examines the implications of unemployment resulting from efficiency wages for international factor movements in a standard Heckscher-Ohlin model where the relative size of the endowments of skilled and unskilled workers and the efficiency wage induced unemployment level in the unskilled labour market are simultaneously determined given the population, supply of capital and its distribution in the economy. Capital in the economy is used only to train individuals for the skilled labour market, where workers are fully employed. It is shown that the optimum labour inflow in the market with domestic distortion and the optimum capital inflow are always positive because they reduce the severity of distortion by raising employment and income for the residents. The income and employment of foreigners also increase. Under this situation the optimum labour or capital outflow on the other hand is always zero. These conclusions directly contradict the result obtained for international factor movements in the presence of exogenously determined unemployment.     

基于H-O模型的外生技术进步与国际贸易分析

在H-O模型的基础上通过几何分析和代数证明,本文分别阐述了在小国情形和大国情形下,出口部门与进口部门的希克斯中性技术进步对一国的生产模式、贸易模式、要素报酬、要素密集度和社会福利的影响。     

Variable labour supply and the pure theory of international trade : An empirical note

Previous writers have shown that variable labour supply may lead to perverse price output responses in the two-sector Heckscher-Ohlin model. This note attempts to assess the empirical likelihood, as opposed to the theoretical possibility, of such perversities. Using a range of plausible parameter values, we conclude that cases of a perverse price-output response consistent with dynamic stability of the model, though theoretically possible, are unlikely to arise in practice.     

The core and periphery of the world economy

This paper reviews three models of foreign trade, including the Heckscher-Ohlin model, the new trade theory based on increasing returns to scale, and the model of economic geography and trade with agglomeration effects. It demonstrates that gravity models perform relatively well for differentiated and non-differentiated products. This result supports Hummels' and Levinsohn's () critique of the new theory foundation of the gravity equation. Furthermore, the bilateral trade relations of peripheral countries are often identified as outliers. This pattern of outliers is consistent with the model of geography and trade.     

Wealth Distribution,Elasticity of Substitution and Piketty: An ‘Anti‐Dual’ Pasinetti Economy

This paper studies the dynamics of wealth distribution between workers and capitalists in a neoclassical growth model with differential saving rates. It shows that if capitalists are thriftier than workers and the factors elasticity of substitution is high enough to ensure endogenous growth, capitalists’ share of total wealth asymptotically tends to one. It is also proved that a tax on capital income shifts the long run distribution of wealth in workers’ favor, and that the capitalists’ share of total wealth is a decreasing function of the tax rate. The results of the paper are compared to Piketty's ‘fundamental laws’ of capitalism.     

Ricardian-Heckscher-Ohlin comparative advantage: Theory and evidence

This paper derives and estimates a unified and tractable model of comparative advantage due to differences in both factor abundance and relative productivity differences across industries. It derives conditions under which ignoring one force for comparative advantage biases empirical tests of the other. I emphasize two empirical results: First, factor abundance- and relative productivity-based models each possesses explanatory power when nesting the other as an alternate hypothesis. Second, productivity differences across industries do not bias tests of the HO model in my sample. However, I find weak and mixed evidence that Heckscher-Ohlin forces can potentially bias tests of the Ricardian model.     

Multiple cones, factor price differences and the factor content of trade

This paper examines the theoretical predictions of the multi-cone Heckscher-Ohlin model and the empirical evidence for it. I extend Helpman (1984)by identifying additional restrictions that characterize the free trade equilibrium. I illustrate that the complete set of restrictions are the building blocks of a multi-cone factor content specification which is the factor content dual to Alan Deardorff's (1979)well-known chain of comparative advantage goods prediction. The theoretical analysis implies that the existing tests of Helpman are incomplete. Applying the complete set of restrictions to Choi and Krishna's data set of 8 OECD countries, I find limited empirical support. This is compatible with previous studies suggesting that OECD countries do not occupy different cones.     

On the similarity of country endowments

We study the production side of the Heckscher-Ohlin model empirically. The evidence we present suggests that the endowments of countries around the world are too dissimilar for all countries to be able to produce the same set of goods. In contrast, the endowments of the rich OECD countries are sufficiently similar, so that these countries do not have to specialize in different subsets of goods. Our findings have implications for a variety of issues ranging from the trade and wages debate to economic development. Our analysis relies on the lens condition of Deardorff [Journal of International Economics 36 (1994) 167-175] that compares country endowments with sectoral factor inputs. We mainly focus on the production factors capital and labor. We test the robustness of the results with different data sets and with corrections for international differences in productivity and human capital. We confirm the similarity of the developed OECD countries with skilled and unskilled labor data. We also investigate in detail the implications of measurement error and sectoral aggregation.