Junko Doi

Indeterminacy in the free-trade world

We show that indeterminacy arises in a discrete-time competitive two-country dynamic model of international trade in which externalities, imperfect competition, public goods, and government intervention are assumed away. The present model is a standard dynamic trade model in the sense that there is neither an international credit market nor international factor mobility, and these intrinsic features are a source of indeterminacy. Indeterminacy is implied by the condition for the existence of a steady state.

A Modified Heckscher-Ohlin Theorem Under Quasilinear Utility Functions

Constructing a two-country, two-good, two-factor model of international trade under quasi-linear utility functions, we obtain a Modified Heckscher-Ohlin (MHO) Theorem that relates the trade pattern to the international distribution of factor endowments. We also show that the MHO Theorem survives imperfect competition and increasing returns.