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发布时间:2014-07-01 15:24:38  

International Economics

Chapter 3
Labor Productivity and Comparative Advantage: The Ricardian Model

Preview
? The Mercantilism ? absolute advantage ? Opportunity costs and comparative advantage ? A one factor Ricardian model ? Production possibilities

? Gains from trade
? Wages and trade

The Mercantilism

1. The basic views 2. Comparing the early stage and the later mercantilists

3. The Criticism to Mercantilism

The Mercantilists
? The basic views :

① National wealth: precious metals. ② The wealth originated from foreign trade. ③ It stressed an excess of exports over imports. ④Governments controlled international trade

The Mercantilists
? the early stage and the later mercantilists

The early: The specie control: limited the import

of luxury goods and prohibited the
flowing of gold, silver

The later: The specie management: Specie
brought about trade and trade increased specie

The Criticism to Mercantilism
? The Price-Specie-Flow Mechanism

The Relation Between the Price and the Specie:
The supply of specie ↑, the goods’ price ↑

The supply of specie ↓, the goods’ price ↓

? Adam Smith’s views in The Wealth of Nations

The point of Adam Smith’s views
? Labor theory of value ? Division of labor ? Principle of absolute advantage

The model of 2x2x1

Principle of absolute advantage One Person per Day of Labor Produce
Country U.S India Machines 5 machines 2 machines Cloth 10 yards of cloth 15 yards of cloth

Principle of absolute advantage
specialize in the production between countries Machines U.S +5 Cloth -10

India
the whole world

-2
+3

15
+5

The Gains from Specialization
2X2X1 model: U.S, India; Machines, Cloth; L =100

Before Specialization:
Machines Cloth

U.S
India

50×5 = 250
50×2 = 100

50× 10= 500
50×15 = 750

the world

350

1250

The Gains from Specialization
Production after specialization
U.S India 5×100=500 machines 15×100=1500 cloth

Exchange after specialization : term is 1:3 Machines U.S India 500 - 200 = 300 200 Cloth 600 1500 - 600 = 900

Comparing the gains from trade
Before Specialization Machines U.S 250 India 100 the world 350 After specialization U.S 300 India 200 the world 500

Cloth 500 750 1250 600 900 1500

Comparative Advantage
unit:labor time

1wine

1cloth

U. S U. K

120 80

100 90

A One Factor Ricardian Model
Assumptions:
1. Labor is the only important resource for production.

2. Labor productivity in each country is constant across time.
3. The supply of labor in each country is constant.

A One Factor Ricardian Model
4. Only two goods are important for production and consumption: wine and cheese. 5. Laborers are allowed to inflow from one industry to another one, but can’t move between two countries. 6. Only two countries are modeled: domestic and foreign.

Comparative Advantage
Specialization Britain: 170/80=2.125 wine United States: 220/100=2.2 cloth

Trade : 1︰1 Britain: 1.125wine United States: 1 wine

1cloth 1.

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