Makoto Tawada

The production-possibility set with public intermediate goods

Publisher Summary This chapter explains that the set of feasible net production points is convex if the underlying production functions are of the constant returns, no-joints-products type, and if there are no technological externalities. However, the upper boundary of the set, that is, the transformation surface, is not necessarily strictly concave; it may contain linear segments or, more generally, flats of dimension possibly greater than one. Recently, it has been shown that the degree of flatness is related to the rank of the matrix of primary factor inputs. It has been shown that if at any point P in the transformation surface, there are s industries active, then the surface contains an (s-r)-dimensional flat embracing P if and only if at P there are exactly r linearly independent vectors of primary-factor inputs. As corollary, if the number of primary factors is less than s, then P necessarily lies in a flat of dimension at least one.

International trade with a public intermediate good

Abstract The purpose of this paper is to investigate familiar trade theorems such as the Stolper-Samuelson, Samuelson-Rybczynski, Heckscher-Ohlin, and factor-price equalization theorems, when a public intermediate good is accommodated in the 2 × 2 general equilibrium trade model. The public good, which is introduced by the Lindahl pricing rule, is assumed to be of a semipublic kind. Then we present the circumstances where the positive results for all of the above theorems, except the factor-price equalization theorem, hold. As for factor-price equalization, we show that there is a tendency for trade to equalize prices.

International Trade with a Public Intermediate Good and the Gains from Trade

This paper presents a one-primary factor, two-consumer good, and two-country model of international trade where each countrys government supplies a country-specific public intermediate good so as to attain efficient production. By introducing the Marshallian adjustment process, it is demonstrated that the country with larger factor endowment exports the good whose productivity is more sensitive to the public intermediate good. Our normative analysis of free trade shows the following results. First, at least one country gains from trade. Secondly, if a country incompletely specializes in the trading equilibrium, the country necessarily loses from trade. Copyright

On the shape of the single-country and world commodity-substitution and factor-substitution surfaces under conditions of joint production

Abstract In recent years trade theorists have completed the task of specifying necessary and sufficient conditions for the single-country and world transformation surfaces to be locally of any assigned degree of flatness. However those conditions are relevant only if the technology is of the no-joint-products type. In the present note we derive necessary and sufficient conditions for the single-country and world transformation surfaces to be of any assigned degree of flatness under conditions of joint production; and we also obtain, as a by-product, necessary and sufficient conditions for the single-country and world equal-product surfaces to be of any assigned degree of flatness.

Does a Bilateral FTA Pave the Way for Multilateral Free Trade

We determine whether a bilateral free trade agreement (FTA) acts as a building block for multilateral free trade (MFT) in a three‐country model with asymmetric domestic markets. Our main conclusions are as follows: (i) A bilateral FTA between two large countries can act as a building block for MFT; (ii) A bilateral FTA between two small countries acts as a stumbling block for MFT; (iii) This FTA can be Pareto improving when a multilateral trade agreement is not feasible.

Endogenous Timing in a Strategic Trade Policy Game: A Two-Country Oligopoly Model with Multiple Firms

This paper examines strategic trade policy games where the number of firms in the importing and exporting countries differs and all firms play as Cournot oligopolies. Under the assumption of linear demand and constant marginal cost, we show that, if the number of firms in the exporting country exceeds that in the importing country by more than three, the government of the exporting country chooses to move as a leader, imposing an export tax on firms. The government of the importing country then becomes a follower and imposes an import tariff. This lies contrary to the previous study, which assumed that there is only one firm in each country.

The properties of the set of production possibilities with pure intermediate products

Publisher Summary The shape of the production-possibility set crucially affects the theories of welfare economics and international trade. In particular, the convexity property of the production set plays an important role in the analysis of factor price equalization and in the proof of the Heckscher–Ohlin theorem. Even if convexity is assured, there still remains another difficulty arising from the flatness of its frontier. This chapter discusses a special case in which there exists a category of pure intermediate goods. Such goods have been figured prominently in the literature on effective protection. In particular, that chapter explains how to derive the necessary and sufficient conditions of any assigned degree of flatness in the production frontier. As a by-product, the non-substitutability of pure intermediate goods is also shown.

History‐Dependent Paths and Trade Gains in a Small Open Economy with a Public Intermediate Good

This study reexamines McMillans (International Economic Review 19 (1978), 665–78) analysis of a dynamic small open economy with a public intermediate good. Concerning the trade patterns of the open economy, we find results that were overlooked in McMillans analysis. Among others, if labor endowment is of intermediate size, there are two saddle‐point steady states, and the initial stock of the public good determines the long‐run trade pattern. We also add a gains‐from‐trade analysis to McMillans model and demonstrate that if the economy has a comparative advantage in a good with productivity less sensitive to the public intermediate good, the economy may lose from trade at the steady state.

On the Behavior of Monopoly in General Equilibrium Trade Models

A great deal of attention has been paid to the analysis of the HeckscherOhlin general equilibrium trade theory with monopoly. (See, for example, Batra (1973), Cassing (1977), Kemp and Yabuuchi (1990), Lahiri and Ono (1989), Markusen (1981), Melvin and Warne (1973), Okuguchi (1979), (Panagariya (1981, 1982), and others.) Concerning the behavior of monopoly, however, these existing studies simply adopted the partial equilibrium analysis and overlooked or otherwise neglected two important effects that may be crucial to the equilibrium outcome with a monopoly.

The world production frontier under variable returns to scale

Abstract We consider the properties of the world production set under conditions of variable returns to scale, with some (but not all) factors internationally mobile and with some (possibly all) products internationally mobile. It is shown that, broadly speaking, the world production set has the same properties as the production set of a single closed economy.