This document provides a summary of previous chapters in a textbook on international economics. It discusses key topics like comparative advantage, specific factors models, and the Heckscher-Ohlin model of trade. The summary reviews the main conclusions of each chapter, including that countries benefit from trade by specializing according to comparative advantage, and that trade can impact income distribution by benefiting owners of abundant factors more than scarce factors.
2. Previous
contents
• Chapter1
Introduc;on
• Chapter2
World
trade:
An
overview
• Chapter3
Labor
produc;vity
and
compara;ve
advantage
– :The
Ricardian
model
• Chapter4
Specific
factors
and
Income
distribu;on
• Chapter5
Resources
and
trade
– :The
Heckscher-‐Ohlin
model
2
3. Chapter1
Introduc;on
7
themes
recur
throughout
the
study
of
interna;onal
economic
1. The
gains
from
trade
2. The
paSern
of
trade
3. How
much
trade?
4. Balance
of
payments
5. Exchange
rate
determina;on
6. Interna;onal
policy
coordina;on
7. The
interna;onal
capital
markets
3
4. Chapter2
World
trade:
An
overview
• The
gravity
model
– The
trade
between
any
two
countries
is
propor;nal
to
the
products
of
their
GDP
and
diminishes
with
distance.
• Interna;onal
trade
is
at
record
levels
rela;ve
to
the
size
of
the
world
economy.
• Manufactured
goods
dominate
modern
trade
today.
– Developing
countries
have
shied
from
being
mainly
exporters
of
primary
products
to
being
mainly
exporters
of
manufactured
goods.
4
5. How
much
trade?
• The
seemingly
eternal
debate
over
how
much
trade
allow
is
the
most
important
policy
theme.
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exports
import
net
exports
(Trillion
yen)
5
6. Chapter3
Labor
produc;vity
and
compara;ve
advantage
:The
Ricardian
model
• The
Ricardian
model
– Labor
is
the
only
factor
of
produc;on,
and
countries
differ
only
in
the
produc;vity
of
labor
in
different
industries.
– A
countries
produc;on
paSers
is
determined
by
compara;ve
advantage.
• Trade
benefits
a
country
in
either
of
two
ways.
– Instead
of
producing
a
good
for
itself,
a
country
can
produce
another
good
and
trade
it
for
the
desired
good.
– Trade
enlarges
a
countries
consump;on
possibili;es.
6
7. Chapter4
Specific
factors
and
Income
distribu;on
• Specific
factor
model
– Differences
in
resources
can
cause
countries
to
have
different
rela;ve
supply
curves,
and
thus
cause
interna;onal
trade.
– Factors
specific
to
export
sectors
in
each
country
gain
from
trade,
while
factors
specific
to
import-‐compe;ng
sectors
lose.
Mobile
factors
that
can
work
in
either
sector
may
either
gain
or
lose.
• Interna;onal
trade
oen
has
strong
effects
on
the
distribu;on
of
income
within
countries.
– Factors
cannot
move
instantaneously
and
costlessly
from
one
industry
to
another.
– Changes
in
an
economy’s
output
mix
have
differen;al
effects
on
the
demand
for
different
factors
of
produc;on.
7
8. Chapter5
Resources
and
trade
:The
Heckscher-‐Ohlin
model
• Model
of
two-‐factor
economy
– Two
countries,
two
goods,
two
factors
of
produc;on
• Heckscher-‐Ohlin
theory
– Countries
tend
to
export
goods
that
are
intensive
in
the
factors
with
which
they
are
abundantly
supplied.
• The
owners
of
a
country’s
abundant
factors
gain
from
trade,
but
the
owners
of
scarce
factors
lose.
– There
are
s;ll
gains
from
trade,
in
the
limited
sense
that
that
winners
could
compensate
the
losers,
and
everyone
would
be
beSer
off.
8