Sanna-Randaccio: Lectures n The Ricardian Model

Transcription

1 Snn-Rndccio: ectures n. 4-5 he Ricrdin Model Assumtions Absolute dvntge Comrtive dvntge (numericl emle) Comrtive dvntge nd rnsformtion Curve wh the C is liner wh comlete seciliztion ggregte trde benefits Individul trde benefits trde effects on rel wges bsolute dvntge nd rel wges

2 If Interntionl trde is dvntgeous for both countries (is mutull beneficil) Wh re utrkic reltive rices different between countries? Countries differences generte this result: Ricrdin model (difference in the techniques of roduction) Heckscher-Ohlin model (differences in reltive fctor endowments) Differences in the demnd structure

3 Ricrdin Model Assumtions: - 2 Countries (H,F) 2 Goods (X,Y) - rimr fctor of roduction (bour) - nd given (erfect immobilit between countries) - erfect cometition in goods nd fctor mrkets - technolog: fied technicl coefficients (lbour hours er unit of outut). Constnt RtS. X F ( ) Note tht MMKM : X h dx d MP ( etc.) Y F ( )

4 bour theor of vlue Goods rices re determined b the quntit of lbour necessr to roduce them w h w h = unit cost of roduction eressed in terms of lbour = monetr wge in countr H AC MC constnt Zero rofit condition: w wh h From which:

5 Absolute dvntge wine (cloth P more efficient (i.e. is suerior) in the roduction of wine (X) GB more efficient (i.e. is suerior) in the roduction of cloth (Y)

6 Comrtive dvntge Comrtive cost (oortunit cost ) of wine (X) in terms of cloth (Y) rtio between the bsolute unit costs of the two goods in the sme countr Cost of roducing n dditionl unit of X mesured in terms of the required reduction in Y. Note tht nd he mount of Y tht the econom hs to give u to obtin n dditionl unit of X.

7 Comrtive dvntge (wine) (cloth,2 0,88 P bsolute dvntge (i.e. is suerior) in the roduction of wine (X) nd cloth (Y) But there re gins from trde if there is difference in the comrtive costs which generte comrtive dvntge:,2 0,88

8 Oortunit cost (comrtive cost) of wine in terms of cloth H: In order to roduce dditionl unit of X is necessr to decrese the roduction of Y b,2 units. (Remember tht ). imlies tht If the oortunit cost of X in terms of Y is lower in countr F this imlies tht F hs comrtive dvntge (is reltivel more efficient) in the roduction of X.,2 0,88

9 If () F hs comrtive dvntge in the roduction of good X, thus it will secilize in nd eort X. () imlies tht: H hs comrtive dvntge in the roduction of good Y, thus it will secilize in nd eort Y. tht is

10 Note tht imlies tht 0,88 <,2 We cn onl define the intervl in which the ost-trde rice rtio lies (references reresent the missing fctor) 0,88;,2 Acountrhscomrtive dvntge in the roduction of one good if the oortunit cost of tht good in terms of the other is smller thn brod. his is then the sector in which the countr hs reltive lrger technologicl dvntge (or reltive smller technologicl disdvntge ).

11 OVERA GAINS FROM RADE rde s n indirect method of roduction (ssume ) F: if Y is roduced in the countr: 90 hours of lbour er unit of Y. if Y is roduced indirectl (countr F echnges X con Y in the interntionl mrket): 80 hours of lbour er unit of Y. F secilizes in nd eort X, the good in which it hs comrtive dvntge (i.e. in which it hs the reltivel greter dvntge) H: H secilizes in nd eort Y, the good in which it hs comrtive dvntge (i.e. in which it hs reltivel smller disdvntge)

12 X F ( ) Y F ) iner rnsformtion Curve ( ( ) X Y Y X Y X X Y rnsformtion curve for count H (constnt oortunit cost) (sloe in bsolute terms)

13 GAINS FROM RADE rde ends the consumtion ossibilities of ech econom. Countr H secilizes (comlete seciliztion) in the roduction of Y. It echnges Y with X in the interntionl mrket nd cn consume in n oint on the isoincome line which indictes the vlue of roduction t interntionl rices red line-). Isoincome line with trde (sloe in bsolute terms)

14 Gins from trde (t countr level) : F : 200 H X Y Y X

15 Gins from trde (t individul level): effects on rel wges We should define the consumtion ossibilities of n individul worker. Assumtion: worker owns unit of lbour worker s income: w h individul worker budget constrint: X Y w h budget line for individul worker Y m w h (bsolute vlue of the sloe) X m w h Rel wge mesured in terms of good X

16 Assume tht : H: comlete seciliztion the roduction of Y Since Y is roduced onl in H we hve rel wge in terms of the eort good is: w h Rel wge in terms of the imort good increses: w h

17 Absolute dvntge nd rel wges Assume : m thus H secilizes in (eort ) Y F secilizes in (eort ) X F roduce X: rel slr in vlued in terms of X (the eorted good)) f w f w f h w w

18 Questions ) Wht determines the difference between the utrkic rice rtio in the two countries (nd thus trde)? 2) Which countries benefit from interntionl trde? Onl the technologicll most dvnced ones? 3) Imct of trde for countries nd within ech countr. 4) Being the technologicll most dvnced countr leds to benefits for the countr/the individuls? In cse which benefits?