《Advanced International Trade----Feenstra(Chapter1. Preliminaries Two-Sector Models). pp31》.pdf

COPYRIGHT NOTICE: Robert C. Feenstra: Advanced International Trade is published by Princeton University Press and copyrighted, © 2003, by Princeton University Press. All rights reserved. No part of this book may be reproduced in any form by any electronic or mechanical means (including photocopying, recording, or information storage and retrieval) without permission in writing from the publisher, except for reading and browsing via the World Wide Web. Users are not permitted to mount this file on any network servers. For COURSE PACK and other PERMISSIONS, refer to entry on previous page. For more information, send e-mail to permissions@ Chapter 1 Preliminaries: Two-Sector Models We begin our study of international trade with the classic Ricardian model, which has two goods and one factor (labor). The Ricardian model introduces us to the idea that technological differences across countries matter. In comparison, the Heckscher-Ohlin model dispenses with the notion of technological differences and instead shows how factor endow- ments form the basis for trade. While this may be fine in theory, the model performs very poorly in practice: as we show in the next chapter, the Heckscher-Ohlin model is hopelessly inadequate as an explanation for his- torical or modern trade patterns unless we allow for technological differ- ences across countries. For this reason, the Ricardian model is as relevant today as it has always been. Our treatment of it in this chapter is a simple review of undergraduate material, but we will have the opportunity to re- fer to this model again at various places throughout the book. After reviewing the Ricardian model, we turn to the two-good, two- factor model that occupies most of this chapter and forms the basis of the Heckscher-Ohlin model. We shall suppose that the two goods are traded on international markets, but we do not allow for any movements of