1、1,Chapter 5 The Standard Trade Model,Introduction A Standard Model of a Trading Economy International Transfers of Income: Shifting the RD Curve Tariffs and Export Subsidies: Simultaneous Shifts in RS and RD Summary Appendix: Representing International Equilibrium with Offer Curves,2,Introduction,Pr
2、evious trade theories have emphasized specific sources of comparative advantage which give rise to international trade: Differences in labor productivity (Ricardian model) Differences in resources (specific factors model and Heckscher-Ohlin model) The standard trade model is a general model of trade
3、 that admits these models as special cases.,3,5-1 A Standard Model of a Trading Economy,The standard trade model is built on four key relationships: Production possibility frontier and the relative supply curve Relative prices and relative demand World relative supply and world relative demand Terms
4、 of trade and national welfare,4,Production Possibilities and Relative Supply Assumptions of the model: Each country produces two goods, food (F) and cloth (C) Each countrys production possibility frontier is a smooth curve (TT) The point on its production possibility frontier at which an economy ac
5、tually produces depends on the price of cloth relative to food, PC/PF. Isovalue lines(P94) Lines along which the market value of output is constant,5,Figure 5-1: Relative Prices Determine the Economys Output(P95),Isovalue lines,6,Figure 5-2: How an Increase in the Relative Price of Cloth Affects Rel
6、ative Supply(P96),VV2(PC/PF)2,TT,7,Relative Prices and Demand The value of an economys consumption equals the value of its production:PCQC + PFQF = PCDC + PFDF = VThe economys choice of a point on the isovalue line depends on the tastes of its consumers, which can be represented graphically by a ser
7、ies of indifference curves.,8,Indifference curves(P96) Each traces a set of combinations of two goods consumption that leave the individual equally well off They have three properties: Downward sloping The farther up and to the right each lies, the higher the level of welfare to which it corresponds
8、 Each gets flatter as we move to the right,9,Figure 5-3: Production, Consumption, and Trade in the Standard Model(P97),Indifference curves,10,If the relative price of cloth, PC/PF , increases, the economys consumption choice shifts from D1 to D2. The move from D1 to D2 reflects two effects: Income e
9、ffect Substitution effect It is possible that the income effect will be so strong that when PC/PF rises, consumption of both goods actually rises, while the ratio of cloth consumption to food consumption falls.,11,Figure 5-4: Effects of a Rise in the Relative Price of Cloth(P98),12,The Welfare Effec
10、t of Changes in the Terms of Trade Terms of trade The price of the good a country s exports divided by the price of its imports.(P94) A rise in the terms of trade increases a countrys welfare, while a decline in the terms of trade reduces its welfare.(P98),13,案例分析:发达国家和发展中国家的贸易条件,发达国家和发展中国家19721993年
11、的贸易条件 （单位出口价值/单位进口价值，1972年为100）,14,发达国家和发展中国家19721993年的贸易条件（单位出口价值/单位进口价值，1972年为100),15,Determining Relative Prices Suppose that the world economy consists of two countries: Home (which exports cloth) Its terms of trade are measured by PC/PF Its quantities of cloth and food produced are QC and QF Fo
12、reign (which exports food) Its terms of trade are measured by PF/PC Its quantities of cloth and food produced are Q*C and Q*F,16,To determine PC/PF , one must find the intersection of world relative supply of cloth and world relative demand. The world relative supply curve (RS) is upward sloping bec
13、ause an increase in PC/PF leads both countries to produce more cloth and less food. The world relative demand curve (RD) is downward sloping because an increase in PC/PF leads both countries to shift their consumption mix away from cloth toward food.,17,Figure 5-5: World Relative Supply and Demand(P
14、99),18,Economic Growth: A Shift of the RS Curve Is economic growth in other countries good or bad for our nation? It may be good for our nation because it means larger markets for our exports. It may mean increased competition for our exporters. Is growth in a country more or less valuable when that
15、 nation is part of a closely integrated world economy? It should be more valuable when a country can sell some of its increased production to the world market. It is less valuable when the benefits of growth are passed on to foreigners rather than retained at home.,19,Growth and the Production Possi
16、bility Frontier Economic growth implies an outward shift of a countrys production possibility frontier (TT). Biased growth Takes place when TT shifts out more in one direction than in the other(P100) Can occur for two reasons: Technological progress in one sector of the economy Increase in a country
17、s supply of a factor of production,20,Figure 5-6: Biased Growth(P100),21,Relative Supply and the Terms of Trade Export-biased growth Disproportionately expands a countrys production possibilities in the direction of the good it exports(P101) Worsens a growing countrys terms of trade, to the benefit
18、of the rest of the world Import-biased growth Disproportionately expands a countrys production possibilities in the direction of the good it imports Improves a growing countrys terms of trade at the rest of the words expense,22,Figure 5-7: Growth and Relative Supply(P102),(a) Cloth-biased growth,(b)
19、 Food-biased growth,23,International Effects of Growth Export-biased growth in the rest of the world improves our terms of trade, while import-biased growth abroad worsens our terms of trade. Export-biased growth in our country worsens our terms of trade, reducing the direct benefits of growth, whil
20、e import-biased growth leads to an improvement of our terms of trade.,24,Immiserizing growth A situation where export-biased growth by poor nations can worsen their terms of trade so much that they would be worse off than if they had not grown at all(P102) It can occur under extreme conditions: Stro
21、ngly export-biased growth must be combined with very steep RS and RD curves. It is regarded by most economists as more a theoretical point than a real-world issue.,25,Table 5-1: Average Annual Percent Changes in Terms of Trade,26,5-2 International Transfers of Income: Shifting the RD Curve,Internati
22、onal transfers of income, such as war reparations and foreign aid, may affect a countrys terms of trade by shifting the world relative demand curve. Relative world demand for goods may shift because of: Changes in tastes Changes in technology International transfers of income The Transfer Problem Ho
23、w international transfers affect the terms of trade,27,Effects of a Transfer on the Terms of Trade When both countries allocate their change in spending in the same proportions (Ohlins point): The RD curve will not shift, and there will be no terms of trade effect. When the two countries do not allo
24、cate their change in spending in the same proportions (Keyness point): The RD curve will shift and there will be a terms of trade effect. The direction of the effect on terms of trade will depend on the difference in Home and Foreign spending patterns.,28,Figure 5-8: Effects of a Transfer on the Ter
25、ms of Trade(P106),29,Marginal Propensity to Spend: the change of a countrys expenditure divided by the change of its income. A transfer worsens the donors terms of trade if the donor has a higher marginal propensity to spend on its export good than the recipient.(P106) If the donor has a lower margi
26、nal propensity to spend on its export good than the recipient,its terms of trade will actually improve.,30,Presumptions about the Terms of Trade Effects of Transfers A transfer will worsen the donors terms of trade if the donor has a higher marginal propensity to spend on its export good than the re
27、cipient. In practice, most countries spend a much higher share of their income on domestically produced goods than foreigners do. This is not necessarily due to differences in taste but rather to barriers to trade, natural and artificial.,31,非石油国的发展中国家的贸易条件（1980100）,32,Import tariffs(P109) and expor
28、t subsidies (P109)affect both relative supply and relative demand. Relative Demand and Supply Effects of a Tariff Tariffs drive a wedge between the prices at which goods are traded internationally (external prices) and the prices at which they are traded within a country (internal prices). The terms
29、 of trade correspond to external, not internal, prices.,5-3 Tariffs and Export Subsidies: Simultaneous Shifts in RS and RD,33,Figure 5-9: Effects of a Tariff on the Terms of Trade(P110),34,Effects of an Export Subsidy Tariffs and export subsidies are often treated as similar policies but they have o
30、pposite effects on the terms of trade. Example: Suppose that Home offers 20% subsidy on the value of cloth exported: This will raise Homes internal price of cloth relative to food by 20%. This will lead Home producers to produce more cloth and less food. A Home export subsidy worsens Homes terms of
31、trade and improves Foreigns.(P111),35,Figure 5-10: Effects of a Subsidy on the Terms of Trade(P111),RD2,36,Implications of Terms of Trade Effects: Who Gains and Who Loses? The International Distribution of Income(p111) If Home (a large country) imposes a tariff, its welfare increases as long as the
32、tariff is not too large, while Foreigns welfare decreases. If Home offers an export subsidy, its welfare deteriorates, while Foreigns welfare increases. The Distribution of Income Within Countries(p112) A tariff (subsidy) has the direct effect of raising the internal relative price of the imported (
33、exported) good. Tariffs and export subsidies might have perverse effects on internal prices (Metzler paradox).(p112),37,Summary,The standard trade model provides a framework that can be used to address a wide range of international issues and admits previous trade models as special cases. A countrys
34、 terms of trade are determined by the intersection of the world relative supply and demand curves. Economic growth is usually biased. Growth that is export-biased (import-biased) worsens (improves) the terms of trade.,38,International transfers of income may affect a countrys terms of trade, dependi
35、ng if they shift the world relative demand curve. Import tariffs and export subsidies affect both relative supply and demand. The terms of trade effects of an export subsidy hurt the exporting country and benefit the rest of the world, while those of a tariff do the reverse. Both trade instruments h
36、ave strong income distribution effects within countries.,Summary,39,Figure 5A-1: Homes Desired Trade at a Given Relative Price,Appendix: Representing International Equilibrium with Offer Curves,40,Figure 5A-2: Homes Offer Curve,Appendix: Representing International Equilibrium with Offer Curves,41,Figure 5A-3: Foreigns Offer Curve,Appendix: Representing International Equilibrium with Offer Curves,42,Appendix: Representing International Equilibrium with Offer Curves,Figure 5A-4: Offer Curve Equilibrium,43,Question,P115,4,
