Makoto Tawada

Pattern of Specialization, Gains from Trade and Variable Returns to Scale

External economies or diseconomies are prominent sources of market failure. In trade theory, the phenomenon of increasing returns to scale arising from production externalities was noticed early as an important topic of study and the topic has been treated by many trade theorists. When allowing for production externalities compatible with perfect competition, we face two distinctive features which become obstacles to the efficiency of competitive markets. One feature is the nonconvexity of production possibility sets and the other is the inefficiency of equilibria. Thus, it is attractive to examine under these circumstances the robustness of familiar comparative static results such as the price-reward, factor endowment-output, and price-output responses. Many earlier works considered this topic in a context of the Heckscher-Ohlin type of general equilibrium model.(1) In these studies, due to the nature of the analysis, attention was restricted to the case in which incomplete specialization prevails in all countries. Hence the rigorous analysis of the pattern of specialization remains to be made.

The global correspondence principle

Abstract The Global Correspondence Principle is generally invalid if there are more than two goods. However, attenuated forms of the Principle, valid for any number of goods, can be found by restricting the Jacobian of the excess-demand functions.

Trade and Gains from Trade Between Profit-maximizing and Labour-managed Countries with Imperfect Competition

It is known that, in the Heckscher-Ohlin type of general equilibrium trade models with one commodity produced by Cournot Oligopolists in the world market, the smaller country exports the imperfectly competitive commodity and gains from trade but the larger country may lose from trade. The present paper examines these results under the assumption that all firms of one country are labour-managed and the countries are the same in size. Then we obtain the result that the profit-maximizing country exports the imperfectly competitive commodity and gains from trade but the labour-managed country may lose from trade.

The Stability Properties of Trade Equilibrium

When a trade equilibrium is attainable by a price- or quantity-adjustment mechanism, the equilibrium is usually said to be stable. Needless to say, there is no assurance that all equilibrium points are stable. In addition, the stability of each equilbrium point is crucially influenced by the type of adjustment process assumed.

Natural Resources and the Dynamic Aspect of International Trade

In this chapter we investigate how the pattern of trade is determined in an open economy with a natural resource. We particularly confine our attention to the case of a renewable resource since the case of a non-renewable resource can be treated as its special case. The natural resource is supposed to be extracted by competitive firms and is used as an intermediate good for the production of consumption commodities. Since the resource is renewable, it does not necessarily become extinct and hence there may exist a steady state where the rate of resource-extraction matches its natural growth. In our competitive model, the economy will be shown to reach the steady state from any initial position. Thus our main concern is with the analysis of the steady state.

Public Inputs and the Theory of International Trade

In recent years several parts of the pure theory of international trade have been reworked to incorporate public intermediate goods.(1) Meade[1952] recognized two types of public intermediate goods. One type consists of pure public goods, which Meade called ‘creation of atmosphere’, and the other type consists of semi public goods, which he called ‘unpaid factors’. Pure public goods remain fully available to every firm irrespective of the number of firms. Free information about technology is a typical example of this type of public good. On the other hand, semi-public goods suffer from congestion within an industry and thus a reduction of availability to a firm when the number of firms in this industry expands. Examples of this type of public goods are transportation services of roads and telecommunication networks. The mathematical formulation of the production function for a private good makes clear the distinction between them. The production function is linear homogeneous in primary inputs and semi-public inputs but not in pure public inputs.

The Heckscher-Ohlin-Samuelson Analysis of International Trade under Homothetic Production Externalities

As one of the main developments of the standard Heckscher-Ohlin model, the issue of variable returns to scale has drawn much attention in the literature of trade theory. It actually deserves serious attention because increasing returns to scale operate on production in a considerable number of industries nowadays and because a good deal of modern trade seems to rely on a scale merit arising from this feature. When increasing returns to scale exist in an industry, the industry usually has a tendency to be monopolized. But a different style of variable returns to scale can be recognized when scale economies are external to firms. In this case, perfect competition is consistent with variable returns to scale.