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Introduction to international business

Introduction to international business

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Chapter 6presentation Chapter 6presentation Presentation Transcript

  • Chapter 6 International Trade and Investment
    • Mercantilism
    • Relative Factor Endowments
  • Mercantilism
    is a sixteenth-century economic philosophy that maintains that a country’s wealth is measured by it’s holdings of gold and silver. According to mercantilists, a country’s goal should be to enlarge these holdings by promoting exports and discouraging imports.
  • Mercantilism
    Neomercantilists or Protectionists:
    are modern supporters of mercantilist policies becausethey benefit them. Those are textile manufacturers, steel companies, sugar growers, and peanut farmers etc.
    View slide
  • Relative Factor Endowments
    The theory of relative factor endowments refers the Heckscher-Ohlin theory:A country will have a comparative advantage in producing products that intensively use resources(factors of production) it has in abundance . These economists made two basic observations:
    View slide
  • Relative Factor Endowments
    1. Factor endowments are types of resources vary among countries such as land, labor, capital, and entrepreneurship that a country possesses and can exploit for manufacturing. Countries with a large endowment of resourceswill have a comparative advantage in producing products and tend to be more prosperous than those with a small endowment.
  • Relative Factor Endowments
    Goods differ according to the types of factors that are used to produce them. For example, wheat requires fertile land, oil production requires crude oil reserves, and apparel manufacturing requires unskilled labor.
  • Relative Factor Endowments
    This theorywastested in United States after WWII by economistWassily Leontief.
    It suggeststhat US should export capital-intensive goods and import labor-intensive goods
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