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International Trade
References
Textbooks:
Appleyard, D. and Field, A. (2005) International Economics, McGraw-Hill Ch. 8Husted, S. and Melvin, M. (2007), International Economics, Addison-Wesley Ch. 4
代写留学生论文Krugman, P. and Obstfeld, M. (2006) International Economics Addison-Wesley Ch. 4

Articles:
Helpman, E. (1999), “The Structure of Foreign Trade”, Journal of Economic Perspectives, 13(2), pp.121-144.
Freeman, R. B. (1995), “Are Your Wages Set in Beijing?”, Journal of Economic Perspectives, 9(3), pp. 15-32
Wood, A. (1995), “How Trade Hurt Unskilled Workers”, Journal of Economic Perspectives, 9(3), pp. 15-32

Limitations of Classical Trade Theory
Simple Ricardian theory tends to suggest complete specialisation – but it doesn’t happen in practice
Trade is explained by differences in productivity but this doesn’t explain why such differences exist
Simple comparative advantage doesn’t explain trade between countries with similar levels of productivity (e.g. within the EU)
Heckscher and Ohlin tried to adapt the model by investigating factor endowments and factor intensity
Simple Ricardian theory tends to suggest complete specialisation – but it doesn’t happen in practice
Trade is explained by differences in productivity but this doesn’t explain why such differences exist
Simple comparative advantage doesn’t explain trade between countries with similar levels of productivity (e.g. within the EU)
Heckscher and Ohlin tried to adapt the model by investigating factor endowments and factor intensity
Heckscher-Ohlin theory argues that comparative advantage is defined by differing relative factor endowments
Countries will export goods that are relatively intensive in use of the most abundant factor
e.g. land is relatively abundant in America so we would expect America to export food to Britain
Relative abundance rather than absolute  abundance is important
Absolute coefficients should not be used for ranking
What is important is relative factor intensity
In this example cloth is labour intensive relative to wheat…..therefore
Wheat is land intensive relative to cloth
We can distinguish between physical abundance and economic abundance
Britain has a relative physical abundance of labour per unit of land compared to America, but….
Physical abundance ignores demand
If tastes are similar relative physical and economic abundance will be similar, but…
If tastes are very different between countries the two criteria may give different results (at least prior to trade)
Two countries with two homogeneous factors of production producing two commodities
Technology assumed to be identical in both countries (knowledge can be disseminated)
Each commodity produced under constant returns to scale
One commodity is more intensive in the use of one factor of production relative to the other
Perfect competition in all commodity and factor markets
Factor mobility within each country but not between countries
Tastes are similar between countries
No barriers to trade
No transport costs
A country will have comparative advantage in, and therefore will export, the commodity whose production is relatively intensive in the factor with which the country is relatively well endowed
If America has relatively abundant land it will export food
If Britain has relatively abundant labour it will export cloth
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