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20130829 international economics chap7
 

20130829 international economics chap7

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    20130829 international economics chap7 20130829 international economics chap7 Presentation Transcript

    •   2013/8/29(Sat)   Chapter7   External  Economies  of  Scale  and  the  Interna@onal  Loca@on   of  Produc@on
 
 Interna@onal  Economics    theory  and  policy   1  
    • 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     •  Chapter6  Standard  trade  model 2
    • Chapter1    Introduc@on 7  themes    recur  throughout  the  study  of   interna@onal  economic   1.  The  gains  from  trade   2.  The  paWern  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
    • 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  shi^ed  from  being  mainly  exporters  of   primary  products  to  being  mainly  exporters  of  manufactured  goods.   4
    • How  much  trade? •  The  seemingly  eternal  debate  over  how  much   trade  allow  is  the  most  important  policy  theme.   -­‐100   -­‐80   -­‐60   -­‐40   -­‐20   0   20   40   60   80   100   1979   1980   1981   1982   1983   1984   1985   1986   1987   1988   1989   1990   1991   1992   1993   1994   1995   1996   1997   1998   1999   2000   2001   2002   2003   2004   2005   2006   2007   2008   2009   2010   2011   exports   import   net  exports   (Trillion  yen) 5
    • 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  paWers  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
    • 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  o^en  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
    • 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   beWer  off. 8
    • Chapter6   •  The  standard  trade  model   –  The  rela@onship  between  the  produc@on  possibility   fron@er  and  the  rela@ve  supply  curve.   –  The  rela@onship  between  rela@ve  prices  and  rela@ve   demand.   –  The  determina@on  of  world  equilibrium  by  world  rela@ve   supply  and  world  rela@ve  demand.   –  The  effect  of  the  terms  of  trade   9
    • Chapter7 External  Economies  of  Scale  and  the   Interna@onal  Loca@on  of  Produc@on 10
    • Learning  goals •  Recognizing  why  interna@onal  trade  o^en  occurs  from   increasing  returns  to  scale   •  Understanding  the  differences  between  internal  and  external   economies  of  scale   •  Discuss  the  sources  of  external  economies   •  Discuss  the  roles  of  external  economies  and  knowledge   spillovers  in  shaping  compara@ve  advantage  and  interna@onal   trade  paWers.   11
    • Compara@ve  advantage 12 Compara@ve   advantages Countries  differ  either  in  their  resources  or  in   their  technology  and  specialize  in  the  things   they  do  rela@vely  well. Economies  of  scale  make  it  advantageous  for   each  country  to  specialize  in  the  produc@on   of  only  limited  range  of  goods  and  services
    • Economies  of  scale  and  interna@onal   trade:  An  overview •  The  models  of  compara@ve  advantage  were  based  on  the  assump@on  of   constant  returns  to  scale.   •  To  take  advantage  of  economies  of  scale,  each  of  the  countries  must   concentrate  on  producing  only  a  limited  number  of  goods.   •  It  makes  it  possible  for  each  country  to  produce  a  restricted  range  of   goods  and  to  take  advantage  of  economies  of  scale  without  sacrificing. 13 Table7-1 Relationship of input to out put for a Hypothetical industry Output Total labor input Average labor of input 5 10 2.00 10 15 1.50 15 20 1.33 20 25 1.25 25 30 1.20 30 35 1.17
    • Economies  of  scale  and    market  structure   firms producing total industry production Standard situations 10 100 1,000 External economies of scale 20 100 2,000 Internall economies of scale 5 200 1,000 14 •  External  economies  of  scale  occur  when  the  cost  per  unit  depends  on  the   size  industry  but  not  necessarily  on  the  size  of  any  one  firm.   –  An  industry  where  economies  of  scale  are  purely  external  will  typically  consist  of  many   small  firms  and  be  perfectly  compe@@ve.   •  Internal  economies  of  scale  occur  when  the  cost  per  unit  depends  on  the   size  of  an  individual  firm  but  not  necessarily  on  that  of  the  industry.   –  Internal  economies  of  scale  give  large  firms  a  cost  advantage  over  small  firms  and  lead   to  an  imperfectly  compe@@ve  market  structure.  
    • The  theory  of  external  economies •  Specialized  suppliers   –  Ability  of  cluster   •  Labor  market  pooling   –  A  geographical  concentrated  industry   •  Knowledge  spillovers   –  A  geographical  concentrated  industry   15
    • External  economies  and     market  equilibrium •  When  there  are  external  economies  of  scale,  the  average  cost   of  producing  a  good  falls  as  the  quality  produced  rises.   •  The  larger  the  industry’s  output,  the  lower  the  price  at  which   firms  are  willing  to  sell,  because  their  average  cost  of   produc@on  falls  as  industry  output  rises.   16
    • External  economies,  output,    and  prices 17 •  【Before  trade】  Chinese  buWon  prices  in  the  absence  of  trade  would  be   lower  than  U.S  buWon  prices.   •   【A^er  trade】  Chinese  buWon  industry  will  expand,  while  the  U.S.  buWon   industry  will  contract  :  As  Chinese  industry’s  output  rises,  its  cost  will  fall   further.  As  the  U.S.  industry’s  output  falls,  its  costs  will  rise.   •  【Chapter6】If  cloths  is  rela@vely  cheap in  Home  and  rela@vely    
    • External  Economies     and  the  paWern  of  trade 18 •  The  reason  for  determining  the  paWern  of  specializa@on  and  trade  in  industries   with  external  economies  of  scale  is  historical  con@ngency.   •  Although  the  Vietnamese  industry  could  poten@ally  make  buWons  more  cheaply   than  China’s  industry,  China’s  head  start  enables  it  to  hold  on  to  the  industry.   •  External  economies  poten@ally  give  a  strong  role  to  historical  accident  in   determining  who  produces  what,  and  may  allow  established  paWerns  of   specializa@on  to  persist  even  when  they  run  counter  to  compara@ve  advantage.  
    • Trade  and  welfare     with  external  economies 19 •  When  there  are  external  economies,  trade  can  poten@ally  leave  a  country  worse   off  than  it  would  be  in  the  absence  of  trade.   •  While  external  economies  can  some@mes  lead  to  disadvantageous  paWerns  of   specializa@on  and  trade,  it’s  virtually  certain  that  it  is  s@ll  to  the  benefit  of  the   world  economy  to  take  advantage  of  the  gains  from  concentra@ng  industries.   •  EX)City,  Frankfurt  
    • Dynamic  increasing  returns 20 •  When  an  individual  firm  improves  its  products  or  produc@on  techniques  through   experiences,  other  firms  are  likely  to  imitate  the  firm  and  benefit  from  its   knowledge.   •  The  learning  curve  shows  that  unit  cost  is  lower  the  greater  the  cumula@ve   output  of  a  country’s  industry  to  date.   •  Dynamic  scale  economies,  like  external  economies  at  a  point  in  @me,  poten@ally   jus@fy  protec@onism.   •  The  argument  for  temporary  protec@on  of  industries  to  enable  them  to  gain   experience  is  known  as  the  infant  industry  argument.  
    • Interregional  trade     and  economic  geography 21 Table7-2 Some examples of tradable and nontradable industries Tradable industires Nontradable industires Motion pictures   Newspaper publishers Securities, commodities, etc Saving institutions Scientific research   Veterinary services •  External  economies  play  an  important  role  in  shaping  the  paWern  of   interna@onal  trade,  but  they  are  even  more  decisive  in  shaping  the   paWern  of  interregional  trade.   •  Determining  the  loca@on  of  tradable  industries,  in  some  cases,  natural   resources  play  a  key  role.   •  Clusters  promote  localized  networking,  to  enhance  crea@vity.   •  A  historical  accident  play  a  key  role  to  explain  how  a  par@cular  region   develops  the  external  economies  that  support  an  industry.