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THEORIES OF INTERNATIONAL TRADE - Coggle Diagram
THEORIES OF INTERNATIONAL TRADE
Classical and Neoclasical Theory
Classics
Mercantilism: Bodin, Petty, Mun, Colbert
Physiocracy: Quesnay y Turgot
Absolute Advantage: Smith (1776)
the ability of an individual, company, region, or country to produce a greater quantity of a good or service with the same quantity of inputs per unit of time, or to produce the same quantity of a good or service per unit of time using a lesser quantity of inputs, than its competitors.
Comparative Advantage: Ricardo (1817)
Occurs when a producer has a lower opportunity cost to produce a good or service than another producer. An opportunity cost is the potential benefits an individual, investor, or business misses out on when choosing one alternative over another.
Reciprocal Demand: Mill (1862) J.S. Mill made Ricardo’s theory of comparative cost determinate by stating the conditions for equilibrium terms of trade. Comparative cost difference between the countries sets the outer limits between which international trade can take place profitably. It does not tell where, between the limits, international trade will actually take place.
Neoclassics
Factor endownment: Hecksher (1919) y Ohlin (1933)
The Heckscher-Ohlin model is an economic theory that proposes that countries export what they can most efficiently and plentifully produce. Also referred to as the H-O model or 2x2x2 model, it's used to evaluate trade and, more specifically, the equilibrium of trade between two countries that have varying specialties and natural resources.
The model emphasizes the export of goods requiring factors of production that a country has in abundance. It also emphasizes the import of goods that a nation cannot produce as efficiently. It takes the position that countries should ideally export materials and resources of which they have an excess, while proportionately importing those resources they need.
Empirical test H-O
Leontief (1953)
Leamer (1980,1984)
Bowel et al. (1987)
Trefler (1995)
Choi & Krishna (2004)
New theories
Intra industry trade
Refers to the exchange of similar products belonging to the same industry. The term is usually applied to international trade, where the same types of goods or services are both imported and exported.
Posner (1961)
Linder (1961)
Vernon (1966)
Imperfect competition and economies of scale
Imperfect competition occurs in a market when one of the conditions in a perfectly competitive market are left unmet. This type of market is very common. In fact, every industry has some type of imperfect competition. This includes a marketplace with different products and services, prices that are not set by supply and demand, competition for market share, buyers who may not have complete information about products and prices, and high barriers to entry and exit.
An economy of scale is the cost advantage a company has with the increased output of a good or service. There is a negative relationship between the volume of production of goods and services and the fixed costs per unit for a company.
Krugman (1979)
Brander & Krugman (1983)
Krugman (1986)
Strategic Comercial Policies
Brander & Krugman (1983)
Brander (1986)
Structural heterogeneity
The structuralist theory of development seeks to explain why some regions lag behind in terms of per capita income and why this lag is accompanied by a sharp inequalities in distribution, both within the lagging region and within countries. In the ECLAC Manifesto (ECLAC, 1949), Prebisch used the slow and unequal dissemination of technological progress at the international level as the starting point of his explanation for the differences in the degree of development between countries. The unequal movement of technology gives rise to two poles, the centre and the periphery, which are maintained endogenously over time.
Prebisch (1950)
Singer (1950)
New New Theories
Firm heterogeneity
Firm heterogeneity means that aggregate productivity growth can be fostered significantly by a better allocation of capital and labour across firms, with evidence suggesting that significant productivity gains can stem from enhanced allocative efficiency within sectors.
Clerides et al. (1998)
Bernard & Jensen (1999)
Aw et al. (2000)
Bernard et al (2007)
Productivity and exporter status
Trade select firms. Trade liberalization affects companies asimetrically, since it benefits the larger and more productive ones, while it harms dismal and non-sporty ones, some of which will exit the market. Those, what is cold selection of the fittest takes place.
Melitz (2003)
Bernard et al. (2007, 2011)
Sunk costs
Refers to money that has already been spent and cannot be recovered. In business, the axiom that one has to "spend money to make money" is reflected in the phenomenon of the sunk cost. A sunk cost differs from future costs that a business may face, such as decisions about inventory purchase costs or product pricing. Sunk costs are excluded from future business decisions because they will remain the same regardless of the outcome of a decision.
Roberts & Tybout (1997)
Das et al. (2007)
Ruhl & Willis (2014)
Financial restrictions
Financial constraints arise in the midst of an economic crisis in which the performance of banking institution deteriorate, threatening to stability of intimidation activity within an economy
Manova (2008, 2012)
Kohn et al. (2016,2018)
Latest Theories
Economic complexity
These theories try to explain how important is the complexity of exports, finding some relation between complexity and development.
Hausmann & Klinger (2007)
Hausmann et al. (2007)
Hidalgo et al. (2007)
Hausmann & Hidalgo (2009)
Hausmann et al. (2014)
Global Value Chains
Baldwin (2016)
Antràs & de Gortari (2017)
Antràs, Fort & Tintelnot (2017)
Services
Deardoff (2001)
Lennon (2006)
Deardoff (2011)
Rodrik (2015)
