Download Theory of International Trade: A Dual, General Equilibrium by Avinash Dixit, Victor Norman PDF

By Avinash Dixit, Victor Norman

This e-book expounds alternate thought emphasizing buying and selling equilibrium is basic instead of partial, and is frequently top modelled utilizing twin or envelope features. This yields a compact remedy of normal conception, clarifies a few mistakes and confusions, and produces a few new departures. specifically, the publication (i) supplies unified remedies of comparative statics and welfare, (ii) sheds new gentle at the factor-price equalization factor, (iii) treats the trendy specific-factor version in parallel with the standard Heckscher-Ohlin one, (iv) analyses the stability of funds in most cases equilibrium with versatile and glued costs, (v) experiences imperfect festival and intra-industry alternate.

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Additional resources for Theory of International Trade: A Dual, General Equilibrium Approach (Cambridge Economic Handbooks)

Example text

E. the elasticity on the left-hand side lies between 0 and 1. e. that the derivative on the right-hand side lies between 0 and 1. Now we see that the two amount to the same thing. Finally, let us bring in the quantities of the fixed factors explicitly. Each industry now uses two factors: its specific factor and its allocation of the mobile factor, there being constant returns to scale. If the production of good j employs an amount KJ of a specific factor—which may or may not be the same in a physical sense across sectors—and this factor is the claimant to the sum that has so far been called the pure profit in that sector, then the price of that factor is TTJ/KJ = p5 say.

That is the plan of the next two sections. 44 THEORY OF INTERNATIONAL TRADE 2. PRODUCTION: COST FUNCTIONS Throughout this section, and later on when we use its formulations, we assume constant returns to scale, and the absence of joint production. Then for each good j , we have a production function relating its output x5 to the vector of inputs vj = {v{,.. ,v}m), say Xj = /;(vy)> each P being concave and homogeneous of degree one. e. the factor prices should be common to all of them. It is then advantageous to use a formulation which makes these factor prices the independent variables.

E. dr/dpj. But this is just the optimum output choice xf. The multipliers on the factor quantity constraints are of course the factor prices. e. e. loss-making goods are not produced). It is common to assume that all the factors are fully employed, and this will indeed be the case irrespective of the relative numbers of factors and goods if there is enough possibility of substitution in production. We will usually work with this assumption, and state explicitly any exceptions we make. With regard to (27), however, it is not possible to have any presumption as to which goods will be produced.

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