Traditional Theory Of International Trade Research Articles

Can the expansion of market size increase firm markup? Evidence from China

ABSTRACT Traditional international trade theory suggests that a larger market size leads to more intense competition, thereby reducing firm markup. However, this conclusion does not hold in our research. Based on the theoretical model constructed by Melitz, this paper makes the following extensions: First, introducing the cost-saving effect outside of the competitive effect discussed in traditional international trade theory. Second, introducing a specific marginal cost function, which deepens the analysis of the operating mechanism. What’s more, earlier models focused solely on the market size of the industry itself (the target industry), whereas our analysis also takes into account the impact of the market size of its upstream and downstream industries. Our model indicates that the impact of market size on firm markup depends on the relative magnitude of the competitive effect and the cost-saving effect. With firm cost following a Pareto distribution, the expansion of market size leads to an increase in firm markup. In addition, this paper presents a spatial econometric model using industrial firms’ data from China. The results indicate that the promoting effect of market size on firm markup is more prominent among top-tier firms, state-owned firms, low export intensity firms, and firms in technology intensive industries.

NEW DEVELOPMENT OF INTERNATIONAL TRADE THEORY AND DIFFERENTIATION OF INTERNATIONAL TRADE PATTERN

The development of international trade theory has experienced two main stages: traditional international trade theory and new international trade theory.New international trade theory rises with the development of economic theory,it constantly introduces new economic concepts into the eld of international trade research,explains the causes of the emergence and development of international trade from the perspective of depth,and greatly promotes the development of international trade theory research.Since the end of the Second World War,the pattern of international trade has not been divided,which is reected in the rapid rise of developing economies and the multi-polarization development of international trade.

The Empirical Analysis of High-tech Trade Imbalance Between China and the US

The United States, as a leader in technology industry, has been in a deficit position for a long time in the high-tech trade between China and the United States, which has been increasing year by year. This is obviously contrary to traditional international trade theory and the comparative advantages of the two countries. Based on the US policy restrictions on China ‘s high-tech product exports, the enhancement of China ‘s independent innovation capabilities, and international direct investment in China, this article conducts an empirical analysis to explore the reasons for the China-US high-tech trade imbalance and then gives corresponding policy recommendations.

Policy Analysis and Development Evaluation of Digital Trade: An International Comparison

AbstractAs an extension of traditional trade, digital trade is a new type of trade in the era of the digital economy. In this paper, we first analyze the digital trade‐related strategies of eight leading economies through word clouds and dissect China's digital trade‐related policies using the word frequency method by sorting through the digital trade‐related policy documents of 26 economies and Chinese provinces. We then evaluate the status quo of digital trade development in 111 countries and Chinese provinces by building a digital trade index system to determine the development environment and market potential. The results show that all countries attach great importance to digital technology, data and government guidance in the development of digital trade. The results also reveal that “development,” “service” and “construction” are the three most frequently used words in various Chinese documents. The overall level of China's digital trade is at the global vanguard, but is characterized by uneven regional development. In the era of digital trade, traditional international trade theory is also in urgent need of breakthroughs and innovation.

The Impact of Trade Liberalization on Labor Market of Developing Countries: What can Literature tell us?

This paper reviews recent developments of the impact of trade liberalization on labor market in developing countries (henceforth DC). Many studies suggest that there is a benefit impact of trade liberalization on abandon factor of production (unskilled labor in the case of DC). However, several others works show a reversal trend in these countries such as increased in relative employment and relative’s wages of skilled labor. These later results contradict the prediction of Heckscher Ohlin Stolper-Samuelson model (HOSS) model. To reconcile theory with this empirical controversy some authors have tried to extend the traditional theory of international trade by relaxing one or more assumptions of model. The main message that can be learned about this problem is that neither empirical nor theoretical research have advanced an explanation for this puzzling. By comparing the result of the impact of trade liberalization on labor market in the Latin America and the East Asian regions, we show that differences in countries characteristics play a role to explaining this puzzling.

Ersetzt die Neue Ökonomische Geographie Außenwirtschaftstheorie und Raumwirtschaftstheorie?

Summary The New Economic Geography has two advantages in comparison with the traditional Theory of International Trade. On the one hand, the transport costs are included into the respective models. On the other hand, the factor endowment in the regions or countries is not given in the same way as in the traditional Trade Theory, but it is a result of different transport costs. The New Economic Geography has also great advantages in the field of Regional Economics. It is possible to explain the phenomenon of agglomerations by means of a total microeconomic model with economies of scale in one industry, monopolistic competition and heterogeneous goods. The New Economic Geography completes the traditional theories - Trade Theory and Regional Economics - in important aspects, but does not yet replace these approaches.

Unexpected Effects of the Washington Consensus: Trade Liberalization and Migration Flows in Latin America

The traditional theory of international trade assumes that there is a substitution relationship between international trade and migration flows. However, trade liberalization in Latin America has come with an increase in emigration. This article, based on an econometric analysis for the period 1981–2002, shows that there is a complementary relationship between trade and international migration. One explanation is related to the Washington Consensus. In particular, higher labor market flexibility, in the context of trade openness, has resulted in higher levels of unemployment. Therefore, emigration represents a safety valve that reduces the pressure on Latin American labor markets.

The Relationship between Organization Capital and Trade Structure and Its Policy Enlightenment

Traditional international trade theory is mainly based on comparative advantage. In fact, structure of international trade is more complicated than what is illustrated by theory, which affects illustrating ability of traditional international trade theory. By introducing organizational capital and combing it with specialization and scale economy, this paper interpreted intra-industry and inter-industry trade and put forward relevant suggestions for policy.

Two Major Relative Comparative Advantages of China in International Trade

Sustainable development requires enriching and developing the traditional international trade theory, especially integrating the environmental elements into the current analysis framework of relative comparative advantages. These relationships among labor, capital, and environmental resources are analyzed in this study, using the relative comparative advantages method. As indicated in the analysis, the ever-increasing international trading volume in China relies not only on the relative comparative advantage of labor but also on the environmental one; these are the two major advantages in China. However, the two advantages will experience serious challenge in the future along with a rising cost on labor and environmental pollution.

Convergence Dynamics in Mercosur

According to the traditional theory of international trade, a gradual opening of trade teamed with migration would make initially asymmetric regions more symmetric. In stark contrast, the new economic geography models show that factor mobility and opening may eventually exaggerates initial differences across regions. The mere possibility that uneven development may arise as a result of larger integration renders interesting analyzing the evolution of income disparities in Mercosur after more than a decade of economic integration. This is the main purpose of this paper. The study indicates that income disparities across Mercosur countries and regions have indeed increased during the 1990s. A preliminary analysis regarding the impact of the creation of Mercosur, however, shows that the integration process might not be at the origin of this trend.

Economic Liberalisation. Distribution and Poverty: Latin America in the 1990s

Latin American countries have experienced significant economic reforms since the late 1980s. The most important ones consisted of trade and capital account liberalisation, privatisation of stated‐owned enterprises, and financial and labour markets deregulation. As a general feature, these reforms intended to reduce the role of state in the economy and allow for more market‐oriented policies. The main arguments in favour of market‐friendly reforms in developing countries state that liberalisation and deregulation would lead to more efficient allocation of resources, increasing international competitiveness, absorption of new technologies and, ultimately, higher employment and growth rates. Concerning income distribution, the traditional theory of international trade predicts positive outcomes from liberalisation (through the Stolper‐Samuelson theorem). In this case, theory predicts a sectoral reallocation of resources that would cause an increase in the remuneration of the relatively abundant productive factor (for instance, unskilled labour in developing economies) in comparison with the scarce factor (capital and skilled labour), leading to a more equitable income distribution.

Convergence Dynamics in Mercosur

According to the traditional theory of international trade, a gradual opening of trade teamed with migration would make initially asymmetric regions more symmetric. In stark contrast, the new economic geography models show that factor mobility and opening may eventually exaggerates initial differences across regions. The mere possibility that uneven development may arise as a result of larger integration renders interesting analyzing the evolution of income disparities in Mercosur after more than a decade of economic integration. This is the main purpose of this paper. The study indicates that income disparities across Mercosur countries and regions have indeed increased during the 1990s. A preliminary analysis regarding the impact of the creation of Mercosur, however, shows that the integration process might not be at the origin of this trend.

Common values for the development round

In the traditional theory of international trade, multilateral trade agreements should be easy because self-interested governments unilaterally commit to reduce their own protection and, as a bonus, they reap positive externalities from liberalization by other nations. In practice national governments do not behave as though they are maximizing the welfare of a representative citizen, but instead they respond to pressure from a diverse mix of constituencies and competing special interests. Governments attempt to manage domestic trade-offs within international negotiations, so progress is slow and protection persists. The practical operation of trade negotiations, emblemized by the infamous ‘green rooms’, is characterized by factionalism, horse-trading, and brinkmanship.

Tariffs, factor prices, and welfare in a spatial oligopoly

In this paper we derive endogenous tariff rates for a tariff revenue maximizing policy and a welfare maximizing policy (optimal tariff) in a spatial framework. The underlying model is that of a spatial oligopolistic market with domestic and foreign firms. We assess the outcomes of the model for different tariff rates and the free trade situation, the stress being on welfare considerations. Compared to the traditional theory of international trade and tariffs, this approach affords useful insights into the role of firms‘ locations and transportation costs for profits and consumers‘ surplus in the case of alternative trade policies.

Private International Trade in the Shadow of the Territoriality of Law: Why Does It Work?

The theory of international trade is dominated by a model presupposing a legal order that is perfect in its specifications and controllability, binding for all economic agents, no matter their nationality. World order appears to be cosmopolitan, as defined by Kant [20]. An international private law community such as this, however, does not exist. In fact, there is a territoriality of law, leading to problems largely neglected in the traditional theory of international trade. They are at the heart of what we would like to call the New Institutional Economics of International Transactions (NIEIT) [29; 30; 31; 32; 33]. These problems can best be described in the terminology of property-rights analysis. Economic transactions consist of an exchange of property rights, that is, of sanctioned behavioural relations [13, 1139]. While for domestic trade the legal foundation and its enforcement through the protective [7, 68, 85] are unequivocal, international transactions touch a multitude of legal systems and the monopoly of power claimed by each state within its boundaries. Collisions of norms and gaps between different norm systems then appear. An accord in judicial decisions is often coincidental, and the assistance of the judicial and penal institutions in foreign countries is not at all a matter of course. Thus, because of the absence of a world state, the property rights of economic agents involved in private international trade are often incompatibly defined and insufficiently protected. Consequently, the territoriality of law results in a specifically high amount of uncertainty that we call the constitutional uncertainty in international trade. For agents involved in foreign trade this kind of uncertainty poses coordination problems of a special type. They are reflected in transaction costs, i.e., the costs of coordinating the economic activities among individuals. Consider the following examples [33, 27; 30, 50]: In the year 360 B.C.-as is reported by the Greek author Demosthenes-Zenothemis and the shipowner Hegestratos convinced traders of Syracuse to advance money to them upon declaring untruthfully that their vessel was fully laden with corn belonging to them. The two swindlers sent the money to Massalia, and three days after sailing, Hegestratos tried to scuttle the vessel in order to circumvent the repayment of the credit. But the passengers were alert, and the scuttling attempt failed. Nevertheless, we have reason to believe that the Syracusian traders never saw their money again [19, 4].

Circulating Capital in the Theory of International Trade

The traditional theory of international trade' rests on the assumption that commodities are by primary factors whose supplies are given.2 Indeed, the Heckscher-Ohlin theory claims that comparative advantage is determined by disparities between the factor endowments of different countries. Yet it is readily admitted that capital is not a primary factor. Since it corresponds to produced means of production, capital is an endogenous variable whose optimal quantity is determined by the general equilibrium solution. The purpose of the present paper is to consider some of the special issues raised by the factor capital.3 The discussion is divided into four parts. The first part develops a modified version of the Leontief-Sraffa model for a closed economy. The objective of this modified model is to bring into focus the factor capital and the element of time in the production process. The second and third parts use the modified Leontief-Sraffa model to elucidate some of the most important propositions in the theory of international trade. The last part offers some suggestions for further research.

Trade and allocation of resources in a distorted economy

This paper has tried to analyse the effects of a reduction of customs duties on the Norwegian economy. Traditional international trade theory usually studies production and allocation effects of trade in a two commodities, two factors of production world where everything behaves in accordance with the rules of perfect competition. This paper has, by contrast, tried to study international trade problems within a multisector model assuming distortions in the factor market in the sense that capital has been considered immobile between sectors and wages fixed. Given the distortions assumed in this paper, and also assuming full employment, employment and production effects in the different sectors, due to customs duties reductions, have been estimated. Price changes in sectors sheltered from foreign competition have also been studied. These sectors have been assumed to employ those becoming unemployed in the import- competing industries, due to a customs duties reduction.