Winston W. Chang

SOME THEOREMS OF TRADE AND GENERAL EQUILIBRIUM WITH MANY GOODS AND FACTORS

This paper examines various theorems of trade and general equilibrium in a generalized framework involving arbitrary numbers of goods and factors. It develops structural relations among the changes in outputs, commodity prices, factor rewards, and factor endowments. By finding a way of inverting a bordered matrix with a singular Hessian, the paper derives explicit expressions for the following matrices: the Stolper-Samuelson matrix; the Rybczynski matrix; the matrix which measures the effect of a change in factor endowments upon factor rewards at constant commodity prices; and the matrix which measures the effect of a change in commodity prices upon outputs at constant factor endowments. Various properties of these matrices are used to obtain, among other results, the reciprocity relations and general results on factor-price equalization. The paper also ey.amines the problem of indeterminacy in production when the number of commodities exceeds the rank of the input-coefficient matrix and presents the correct specifications of the supply functions of outputs. Finally a new theorem on the degree of flatness of the production transformation surface is derived.

Optimal trade, industrial, and privatization policies in a mixed duopoly with strategic managerial incentives

Abstract This paper examines optimal trade, industrial, and privatization policies in a home-market model of mixed international duopoly with strategic managerial incentives. Under linear demand and constant marginal costs, the optimal degree of privatization is shown to depend crucially on cost and demand parameters and on the availability of strategic trade and industrial policies. If both firms are equally efficient, optimal trade and industrial policies drive out the foreign firm and the privatization policy loses its effect on national welfare; however, if the home firm is less efficient, then full privatization combined with an import tariff and a production subsidy is optimal for the home country, while an export subsidy is optimal for the foreign country. If trade and industrial policies are unavailable and if both firms are equally efficient, full state-ownership, which drives out the foreign firm, becomes optimal; however, if the home firm is less efficient, only partial privatization is optimal, The state-ownership share is increased if either the market size grows, the home firms efficiency increases, or the foreign firms efficiency decreases. Further, the paper demonstrates the potential conflict between privatization and trade liberalization policies.

Imperfect competition in international trade

Preface. Introduction W.W. Chang, S. Katayama. I: Basic Issues of Imperfect Competition in International Trade. 1. Theory and Policy of Trade with Imperfect Competition W.W. Chang, S. Katayama. 2. The Gains from Free Trade under Imperfect Competition M.C. Kemp, M. Okawa. 3. On the Behavior of Monopoly in General Equilibrium Trade Models M. Tawada, M. Okawa. 4. The International Diffusion of the Fruits of Technical Progress under Imperfect Competition M.C. Kemp, M. Okawa. II: Trade Policy Issues. 5. Demand Behavior and Import Policy R.W. Jones. 6. Elimination of Firm and Welfare under International Oligopoly S. Lahiri, Y. Ono. 7. Intermediate Input Dependency, Technology Catch-Up and Strategic Trade Policy W.W. Chang, Ki-Hong Park. 8. Tariff Protection, Imperfect Competition and Time Consistency S. Ishizawa. 9. Imperfect Competition, Intra-Industry Trade and Trade Policy Y. Uekawa. 10. Dynamic Effects of Subsidies on Output and R&D in an International Export Rivalry Model T. Ohkawa, K. Shimomura. II: Trade Liberalization and Structural Issues. 11. Endogenous Dualistic Structure, Marshallian Externalities and Industrialization M. Ohyama, Y. Fukushima. 12. Inter-Country Gaps in Increasing-Returns-to-Scale Technologies and the Choice among International Economic Regimes K. Suzuki. 13. Retaliatory Mechanisms for Eliminating Trade Barriers: Aggressive Unilateralism vs. GATT Cooperation K.E. Spier, D.E. Weinstein. 14. The Impact of EC92 on the Third Country: a Simple Analytical Framework under Imperfect Competition J. Goto. Index.

Tariff structure and output adjustment in the presence of interindustry flows

Abstract This paper investigates the adjustment of gross and net outputs to a change in tariff structure in models involving interindustry flows. Various conditions for the normal price-gross-output relationship are derived in a two-good, two-primary-factor model. These conditions are expressed in terms of the degree and also the patterns of substitutability and complementarity between different inputs. In the special case where the produced input is not used in its own production, the paper shows that the abnormal relationship between prices and gross outputs can occur only if the two primary factors are complements to each other and their degree of complementarity is sufficiently high. Finally, the response of net outputs due to a change in tariff structure is explored in a general model allowing arbitrary numbers of goods and primary factors.

The Economics Of Offshoring

This paper examines various economic issues on offshoring (international outsourcing). It begins with a discussion of the factors that determine a firms decision to offshore and illustrates, with simple models, the cost saving of offshoring certain stages of production and the advantages of specializing in some input production and engaging in input trade. The paper then examines the recent trend in offshoring with special emphases on the rise of IT offshoring and the characteristics of firms engaging in offshoring and exporting. The effect of offshoring and national welfare is then discussed in light of numerous results in recent empirical studies. Finally, after examining the current US programs to aid the displaced workers, the paper discusses various short-run and long-run policy proposals to alleviate the negative impacts of offshoring.

Vertically-Related Markets, Foreign Competition, and Optimal Privatization Policy

This paper examines the optimal privatization policy in vertically related markets in which an upstream public firm competes with a foreign private rival in supplying a produced input to the domestic and foreign downstream firms competing in the domestic market. It shows that if the upstream public firms market share is sufficiently high, full nationalization is optimal and the resulting profit margin is positive. However, complete privatization is never optimal. Numerical simulations reveal both the diverse optimal privatization regimes and the patterns of optimal privatization levels with varying numbers of the domestic and foreign downstream firms.

Vertically Related Markets, Foreign Competition and Optimal Privatization Policy: Optimal Privatization Policy

This paper examines the optimal privatization policy in vertically related markets in which an upstream public firm competes with a foreign private rival in supplying a produced input to the domestic and foreign downstream firms competing in the domestic market. It shows that if the upstream public firms market share is sufficiently high, full nationalization is optimal and the resulting profit margin is positive. However, complete privatization is never optimal. Numerical simulations reveal both the diverse optimal privatization regimes and the patterns of optimal privatization levels with varying numbers of the domestic and foreign downstream firms.

Theory and Policy of Trade with Imperfect Competition

Most of the traditional theories of trade have been developed on the assumptions of perfect competition and constant returns to scale. Typical examples are the Ricardian and Heckscher–Ohlin models of trade. In the Ricardian model, trade is due to technological differences between countries. In the Heckscher–Ohlin model, technologies are assumed identical between countries, and trade is due to differences in relative factor endowments. Both models succeed in explaining the determinants of interindustry trade. However, they are not capable of explaining the phenomenon of intra-industry trade, which is a major component of world trade. This is chiefly due to the two traditional key assumptions of perfect competition and constant returns to scale.

The Theory of Saving and the Stability of Growth Equilibrium

I. Introduction and summary of main conclusions, 491. — II. The structure of an aggregate economy, 493. — III. The general saving function and the existence of the steady-state growth path, 494. — IV. Uniqueness and stability of the steady-state growth path, 498.

Optimal Transfer Pricing: Competition Mode, Demand and Strategic Characteristics, and Production Technology

The objective of this paper is to find the key factors that affect a firms optimal transfer pricing policy. It examines two minimalist vertical models — one consisting of a vertically integrated firm monopolizing an intermediate input for its own and rivals downstream division, and the other comprising two vertically integrated firms competing in a final goods market. Four modes of competition are considered — Cournot, Bertrand, Stackelberg quantity, and price. The paper shows that, in addition to the usual tax considerations, the optimal transfer pricing policy depends on competition mode, demand and strategic characteristics, vertical structure, and production technology. For example, under the same demand structure and competition mode, the two models can yield diametrically opposite outcomes; within a given vertical model, different competition modes may yield different optimal strategies; and within a given competition mode, the four pairings of ordinary substitutes/complements and strategic substitutes/complements can also produce quite different results. The general structure analyzed in this paper can be applied to other transfer pricing models involving uncertainty, cost sharing, asymmetric information, etc. that have been mainly studied in the literature under specific competition modes and demand and strategic characteristics.