Ronald Findlay

International Trade and Human Capital: A Simple General Equilibrium Model

The paper incorporates the formation of human capital into the two-factor, two-good model of international trade. Workers can choose between being unskilled and earning the corresponding wage or obtaining an education that enables them to earn a higher wage. The wages of skilled and unskilled labor and the direct and indirect costs of education are all determined endogenously, along with the terms of trade and the pattern of comparative advantage. The implications of the model are consistent with the extensive empirical research on the role of human capital in explaining patterns of comparative advantage.

Growth and development in trade models

Publisher Summary Growth and development are used interchangeably. Growth has the connotation of simply more of everything, while development is taken to refer to some qualitative transformation or structural shift. In practice, the development aspect of trade theory arises from the attempt to address problems regarded as of major significance for the less developed countries of the world economy. These have ranged from the infant industry problem of Hamilton and list to the terms of trade problem. The insights and concerns of these critics of orthodox doctrine have led to a number of attempts, sympathetic and otherwise, to handle these issues analytically. This chapter provides an overview on Ricardian theory and considers some neglected aspects of Ricardos ideas on trade and growth, based on his analysis of the distributive shares. It discusses Arthur Lewis three-good Ricardian model of the terms of trade and Emmanuels concept of unequal exchange. It also reviews neoclassical theory, which contains the major mainstream literature on growth and trade, with discussions on comparative statics, dynamics, and the concept of immiserizing growth and foreign investment. It also discusses various theoretical aspects of trade and development issues, including analyses of infant industry protection, two-gap models, the open dual economy, and an extensive discussion of recent work on North–South models.

Tariffs, foreign capital and national welfare with sector-specific factors

Abstract This paper examines the effect on national welfare of an endogenously determined inflow of foreign capital, in the context of a well-known model with sector-specific inputs, both for the case of unrestricted international trade and investment and in the presence of a tariff. The second-best problem of the optimal tax on foreign investment for a given tariff level is also investigated, by application of the concept of shadow prices for primary factors in distorted open economies. The results obtained are then related to analogous propositions derived previously for the standard Heckscher-Ohlin model.

The Developing Countries

Assessing the impact of the projected “single market” for the European Community in “EC92” on the economic situation and performance of the less developed countries (LDCs) considered as a group is the task of this paper. Logically, this requires first that one estimates the nature and magnitude of the formation of the single market on Europe itself, and then attempts to trace the channels through which these effects, whatever they are, might be transmitted to the LDCs. To specify the likely response of the LDCs to these exogenous shocks one also, of course, needs some hypothesis about their structure and behavioural characteristics. Needless to say, a comprehensive study on these lines to do full justice to the task would take a whole research institute quite some time to deliver: all that can be attempted here is to offer some tentative suggestions toward an appropriate conceptual framework for such a study.

Towards A Model of Territorial Expansion and the limits of empire

This chapter presents the theoretical foundation: Ron Findlay’s paper about the optimal extension of empire. It introduces the fundamental model with the choice of cultivating a given area or extending the area and the labor force by military conquest, as referred to above.

Factor bias and technical progress

Abstract The role of factor bias in technical progress has been a bone of contention between labor economists and international trade theorists. By considering progress that results in finite changes in techniques these two views can be reconciled. For example, labor-saving technical progress can result in lowered real wages, even if it is concentrated in the more labor-intensive of two commodities initially produced.

Natural Resources, ‘Vent-for-Surplus’ and the Staples Theory

This chapter integrates the frontier into a model of staples production (where staples are defined as raw materials in high demand in the international market). Agricultural goods are produced with the aid of land and labor. The land has to be developed with the aid of capital before it can be put to use. Manufactures are produced with the aid of labor and capital (the manufactured good itself). Trade is opened when the price of agricultural goods increases. The frontier is then extended and agricultural production increases at the expense of manufactures. The staples model, however, also deals with factor movements, which in turn open the possibility of industrialization and in the end for a general expansion of the economy (both sectors).

Project Evaluation, Shadow Prices, and Trade Policy

The problem of how to determine the appropriate shadow prices of primary inputs for the evaluation of new projects in an open economy subject to distortions is discussed. These shadow prices are compared with the corresponding free-trade and actual market prices. It is shown that if the distortion is an output subsidy or tax on existing production, the optimal intervention for new projects is subsidies and taxes on primary factors equal to the difference between the shadow prices and the market prices and not an output subsidy or single shadow exchange rate to provide offsetting protection for the new project. It is also shown that projects viable under free trade may reduce welfare if they are introduced into a distorted economy, while projects that would increase welfare in these circumstances might not be viable under free trade.

Relative Prices, Growth and Trade in a Simple Ricardian System

The Ricardian system appears to have fascinated every generation of economists since its original formulation. Ours is no exception. Knight (1935), Stigler (1952), Kaldor (1956) and Samuelson (1959) to mention only some of the most eminent theorists of our time, have all devoted papers to examining and appraising the nature of Ricardos unique contribution to economic analysis. Piero Sraffa (1951), in addition to his monument of scholarship in a complete edition of Ricardos works and correspondence, has also given in his Introduction a penetrating interpretation of the evolution of Ricardos thought. Pasinetti (1960) has presented a mathematical formulation of the Ricardian system in which it appears as a simple but elegant and determinate two-sector general equilibrium growth model. The first section of this paper gives an elementary diagrammatic solution of the Ricardo-Pasinetti model, in terms of demand and supply, which serves as the basis for the analysis of the rest of the paper. The second section examines the role of demand in the model and the effects of technological changes on relative prices and the distribution of income. The final section extends the model to consider international trade.

Modeling Global Interdependence: Centers, Peripheries and Frontiers

This chapter argues that, in order to understand the comparative performance of economies, both how they were created and how they interact in an international context needs to be taken into account.