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Chapter 7

Growth and Trade

This chapter has two major purposes. First, it shows how the Heckscher-Ohlin model can be used to analyze economic growth and its impact on international trade. Second, it examines additional aspects of technological progress and its relationship to international trade. Growth in a country's production capabilities shifts the country's production-possibility curve out. Growth is balanced if the ppc shifts out proportionately.

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Slide17
知识点7
案例4
习题60

Knowledge Points

知识点

manual

Balanced Versus Biased Growth

Growth in a country's production capabilities shifts the country's production-possibility curve out. Growth is balanced if the ppc shifts out proportionately. Balanced growth could occur because all factors are growing at similar rates, or because production technology is improving at the same rate in both sectors. Growth is biased if the outward shift in the ppc is skewed, so that the growth favors producing more of one product than the other.

  • Growth in a country’s production capabilities shifts the country’s production-possibility curve (ppc) outward.
  • As the ppc shifts out, we are interested in knowing the effects on:
  • The general shape of the production-possibility curve.
manual

Growth in Only One Factor

Growth in a country's production capabilities shifts the country's production-possibility curve out. Growth is balanced if the ppc shifts out proportionately. Balanced growth could occur because all factors are growing at similar rates, or because production technology is improving at the same rate in both sectors. Growth is biased if the outward shift in the ppc is skewed, so that the growth favors producing more of one product than the other.

  • Rybczynski
  • theorem
  • : In a two-good world, and assuming that product prices are constant, growth in the country’s endowment of one factor of production, with the other factor unchanged, has two results:
manual

Changes in the Country's Willingness to Trade

If instead this is a large country, then changes in its willingness to trade change the equilibrium international price ratio. If the growth reduces the country's willingness to trade, then the reduced supply of exports and the reduced demand for imports results in an increase in the equilibrium relative price of the country's exportable product.

  • As production and consumption change with growth, a country’s willingness to or interest in engaging in international trade can also change. It could:
  • Increase its willingness to trade (export and import more).
  • Decrease its willingness to trade (export and import less).
manual

Effects on the Country's Terms of Trade

If instead this is a large country, then changes in its willingness to trade change the equilibrium international price ratio. If the growth reduces the country's willingness to trade, then the reduced supply of exports and the reduced demand for imports results in an increase in the equilibrium relative price of the country's exportable product.

  • Small country case
  • : If the country is small (i.e. a price-taker in world trade), then its trade has no impact on the international price ratio ( the country’s terms of trade, TOT).
  • Large country case
manual

Technology and Trade

Growth in a country's production capabilities shifts the country's production-possibility curve out. Growth is balanced if the ppc shifts out proportionately. Balanced growth could occur because all factors are growing at similar rates, or because production technology is improving at the same rate in both sectors. Growth is biased if the outward shift in the ppc is skewed, so that the growth favors producing more of one product than the other.

  • Another basis for comparative advantage can arise over time as technological changes occur at different rates in different sectors and countries.
  • In some ways, a technology-based explanation is an alternative that competes with the H-O model.
  • In other ways, technology differences can be consistent with an H-O view of the world.
manual

Balanced and Biased Growth

Growth in a country's production capabilities shifts the country's production-possibility curve out. Growth is balanced if the ppc shifts out proportionately. Balanced growth could occur because all factors are growing at similar rates, or because production technology is improving at the same rate in both sectors. Growth is biased if the outward shift in the ppc is skewed, so that the growth favors producing more of one product than the other.

  • Growth in a country’s production capabilities shifts the country’s production-possibility curve (ppc) outward.
  • As the ppc shifts out, we are interested in knowing the effects on:
  • The general shape of the production-possibility curve.
manual

Single-Factor Growth: The Rybczynski Theorem

One example of very biased growth is growth in only one factor, the other factor unchanged. While the entire ppc shifts out, the growth is strongly biased in favor of the product that uses the growing factor intensively. The Rybczynski theorem indicates that, if product prices are constant, then the output quantity of the product that uses the growing factor intensively will increase, while the output quantity of the other product must contract.

    Cases

    案例与情境

    c.The U.S. willingness to trade increases. With growth of production and ...

    c.The U.S. willingness to trade increases. With growth of production and income, the United States wants to consume more of both goods. Demand for imports of clothing increases because domestic consumption increases while domestic production decreases. (Supply of exports also increases because the increase in domestic production of machinery is larger than the increase in domestic consumption.)

    查看原始摘录

    c.The U.S. willingness to trade increases. With growth of production and income, the United States wants to consume more of both goods. Demand for imports of clothing increases because domestic consumption increases while domestic production decreases. (Supply of exports also increases because the increase in domestic production of machinery is larger than the increase in domestic consumption.)

    Finally, the box “Trade, Technology, and U.S. Wages” (another Focus on ...

    Finally, the box “Trade, Technology, and U.S. Wages” (another Focus on Labor) confronts an important issue—why has the difference in wages between skilled and less skilled workers widened since the 1970s, in the United States and other countries. This could be the Stolper-Samuelson theorem at work, if expanding trade with developing countries placed downward pressure on the prices of products intensive in less skilled labor.

    查看原始摘录

    Finally, the box “Trade, Technology, and U.S. Wages” (another Focus on Labor) confronts an important issue—why has the difference in wages between skilled and less skilled workers widened since the 1970s, in the United States and other countries. This could be the Stolper-Samuelson theorem at work, if expanding trade with developing countries placed downward pressure on the prices of products intensive in less skilled labor. But several studies conclude that this effect is smaller than another—biases in technological change. Technological change seems to have created rising demand for skilled labor for two reasons. First, technological progress has been faster in industries that are intensive in skilled labor, resulting in their faster growth. Second, technological progress is biased in favor of using more skilled labor. Tips

    b.The U.S. willingness to trade probably decreases because the United St ...

    b.The U.S. willingness to trade probably decreases because the United States is now capable of producing its import good at a lower cost. Although the extra production and income lead to an increase in U.S. demand for clothing, the expansion of the supply of clothing that results from the improved technology is likely to be larger, so U.S.

    查看原始摘录

    b.The U.S. willingness to trade probably decreases because the United States is now capable of producing its import good at a lower cost. Although the extra production and income lead to an increase in U.S. demand for clothing, the expansion of the supply of clothing that results from the improved technology is likely to be larger, so U.S. demand for clothing imports probably decreases.

    The growth of the country's production capabilities is likely to change ...

    The growth of the country's production capabilities is likely to change the country's willingness to trade—the quantities that it wants to export and import—even if product prices do not change. The change in the country's willingness can be documented by examining the change in the country's trade triangle for the price ratio that held in the free-trade equilibrium before the growth occurs.

    查看原始摘录

    The growth of the country's production capabilities is likely to change the country's willingness to trade—the quantities that it wants to export and import—even if product prices do not change. The change in the country's willingness can be documented by examining the change in the country's trade triangle for the price ratio that held in the free-trade equilibrium before the growth occurs. The change in the production point depends on whether growth is balanced or biased. The change in the consumption point depends on tastes in the country. At the same price ratio the quantities consumed of both products will increase if both goods are normal. Growth that is balanced or biased toward producing the exportable product is likely to increase the country's willingness to trade. Growth that is sufficiently biased toward producing more of the importable product will reduce the country's willi

    Exercises

    习题与答案

    题目 1Balanced Versus Biased Growth

    Which of the following is one of the fundamental sources of long-run economic growth?

    • A) An expansion of foreign gross domestic product (GDP)
    • B) An increase in demand for the country's importable product
    • C) An improvement in production technologies
    • D) An reduction in local purchasing of the country's exportable products

    正确答案：C | An improvement in production technologies

    难度：1 Easy Bloom's：Remember

    题目 2Balanced Versus Biased Growth

    In the figure below, we see an expansion of the production-possibility curve (from PPC1 to PPC2). The two goods produced are wheat and cloth, which are land-intensive and labor-intensive, respectively. The outward shift of the production-possibility curve shows

    • A) biased growth.
    • B) balanced growth.
    • C) a move from a no-trade situation to free trade.
    • D) an increase in the production costs of both goods.

    正确答案：A | biased growth.

    难度：1 Easy Bloom's：Remember

    题目 3Balanced Versus Biased Growth

    In the figure below, we see an expansion of the production-possibility curve (from PPC1 to PPC2). The two goods produced are wheat and cloth, which are land-intensive and labor-intensive, respectively. The outward shift of the production-possibility curve is likely the result of

    • A) a fall in the average cost of producing cloth.
    • B) an increase in the price of cloth.
    • C) an increase in the size of the labor force, the area under cultivation remaining unchanged.
    • D) an increase in the national amount of usable land, the size of the labor force remaining unchanged.

    正确答案：D | an increase in the national amount of usable land, the size of the labor force remaining unchanged.

    难度：2 Medium Bloom's：Understand

    题目 4Balanced Versus Biased Growth

    Which of the following statements is true?

    • A) Increases in a country's endowments of land, labor, and capital will lead to long-run economic growth.
    • B) Improvements in the technology used in production can lead to increases in current output levels but are not a source of long-run economic growth.
    • C) Improvements in production technology do not affect the shape or position of the production-possibility curve.
    • D) Biased growth leads to a proportionate shift in the production-possibility curve.

    正确答案：A | Increases in a country's endowments of land, labor, and capital will lead to long-run economic growth.

    难度：1 Easy Bloom's：Remember

    题目 5Balanced Versus Biased Growth

    In a country that produces only wine and guns, which of the following is least likely to lead to biased growth?

    • A) The amount of usable land has increased substantially.
    • B) The relaxation of migration laws has led to a huge influx of unskilled workers.
    • C) The technology used to produce guns improves while the technology used to produce wine does not change.
    • D) The relative price of guns in the international market changes.

    正确答案：D | The relative price of guns in the international market changes.

    难度：3 Hard Bloom's：Analyze

    题目 6Growth in Only One Factor

    The Rybczynski theorem asserts that in a two-good model, assuming that product prices stay constant, growth in the endowment of one factor of production with the other factor remaining unchanged, will result in

    • A) an equal increase in the output of both goods.
    • B) an increase in the output of the good that uses the growing factor intensively and a decrease in the output of the other good.
    • C) an increase in the output of both goods, but a relatively greater increase in the output of the good that uses the growing factor intensively.
    • D) an increase in the output of the good that uses the growing factor intensively, but the output level of the other good will remain unchanged.

    正确答案：B | an increase in the output of the good that uses the growing factor intensively and a decrease in the output of the other good.

    难度：1 Easy Bloom's：Remember

    题目 7Growth in Only One Factor

    Assume that a capital-abundant country trades only two goods with the rest of the world, medical equipment and corn. Medical equipment is relatively capital-intensive. According to the Rybczynski theorem, with the relative price of the goods remaining unchanged, an increase in the country's endowment of capital will cause the output of medical equipment to ________ and the output of corn to

    • A) rise; fall.
    • B) fall; rise.
    • C) rise; remain the same.
    • D) remain the same; fall.

    正确答案：A | rise; fall.

    难度：2 Medium Bloom's：Understand

    题目 8Growth in Only One Factor

    Assume that a large capital-abundant country trades only two goods with the rest of the world, medical equipment and corn. Medical equipment is relatively capital-intensive. An increase in the country's endowment of capital will cause the price of medical equipment relative to the price of corn to

    • A) rise.
    • B) fall.
    • C) stay the same.
    • D) rise at first and then fall.

    正确答案：B | fall.

    难度：1 Easy Bloom's：Remember

    题目 9Growth in Only One Factor

    If trade is consistent with the Heckscher-Ohlin (H-O) theory, then growth in a country's scarce factor of production will lead to

    • A) an increased willingness to trade.
    • B) balanced growth.
    • C) a decreased willingness to trade.
    • D) a deterioration in the country's terms of trade.

    正确答案：C | a decreased willingness to trade.

    难度：1 Easy Bloom's：Remember

    题目 10Growth in Only One Factor

    Assume a country produces only wine and cups. Both wine and cup production use land and labor as their only inputs. Wine production is relatively land-intensive while cup production is relatively labor-intensive. According to the Rybczynski theorem, a significant rise in immigration is most likely to lead to

    • A) an increase in the production of both wine and cups.
    • B) an increase in wine production by a greater proportion than the increase in the size of the labor force due to immigration.
    • C) an increase in the production of cups by a greater proportion than the increase in the size of the labor force due to immigration.
    • D) an increase in wine production by a greater proportion than the increase in the production of cups.

    正确答案：C | an increase in the production of cups by a greater proportion than the increase in the size of the labor force due to immigration.

    难度：2 Medium Bloom's：Understand

    题目 11Growth in Only One Factor

    The Rybczynski theorem suggests that development of a new natural resources in a country

    • A) will result in balanced growth.
    • B) may cause the country to export only manufactured products.
    • C) will increase output in all sectors of the economy.
    • D) may cause the manufacturing sector of the country to shrink.

    正确答案：D | may cause the manufacturing sector of the country to shrink.

    难度：1 Easy Bloom's：Remember

    题目 12Changes in the Country's Willingness to Trade

    The rapid accumulation of capital and worker skills in the United States in the 1800s

    • A) resulted in an increase in the export of natural resources by the country.
    • B) made the United States more dependent on imported minerals.
    • C) made the United States more self-sufficient and led to a reduction in its trade volume.
    • D) resulted in rapid deindustrialization in the country.

    正确答案：B | made the United States more dependent on imported minerals.

    难度：1 Easy Bloom's：Remember

    Manual Preview

    教师手册摘录

    This chapter has two major purposes. First, it shows how the Heckscher-Ohlin model can be used to analyze economic growth and its impact on international trade. Second, it examines additional aspects of technological progress and its relationship to international trade.

    Growth in a country's production capabilities shifts the country's production-possibility curve out. Growth is balanced if the ppc shifts out proportionately. Balanced growth could occur because all factors are growing at similar rates, or because production technology is improving at the same rate in both sectors. Growth is biased if the outward shift in the ppc is skewed, so that the growth favors producing more of one product than the other. Biased growth could occur if one factor is growing more quickly than the other, or if production technology is improving more in one sector than the other. (For instance, if only one product's production technology is improving, then the ppc intercept with the other product's axis does not change—see footnote 1 in the text.)

    One example of very biased growth is growth in only one factor, the other factor unchanged. While the entire ppc shifts out, the growth is strongly biased in favor of the product that uses the growing factor intensively. The Rybczynski theorem indicates that, if product prices are constant, then the output quantity of the product that uses the growing factor intensively will increase, while the output quantity of the other product must contract. The reason is that expanding production of the intensive good also requires some of the other factor. This amount of the other factor must be drawn from the other industry, so its output declines. A box applies this concept to the "Dutch disease" of deindustrialization following discovery and development of production of a natural resource.

    The growth of the country's production capabilities is likely to change the country's willingness to trade—the quantities that it wants to export and import—even if product prices do not change. The change in the country's willingness can be documented by examining the change in the country's trade triangle for the price ratio that held in the free-trade equilibrium before the growth occurs. The change in the production point depends on whether growth is balanced or biased. The change in the consumption point depends on tastes in the country. At the same price ratio the quantities consumed of both products will increase if both goods are normal. Growth that is balanced or biased toward producing the exportable product is likely to increase the country's willingness to trade. Growth that is sufficiently biased toward producing more of the importable product will reduce the country's willingness to trade.

    Slide Outline

    课件线索

    • Balanced Versus Biased Growth
    • Balanced and Biased Growth
    • Growth in Only One Factor
    • Single-Factor Growth: The Rybczynski Theorem
    • Changes in the Country’s Willingness to Trade
    • Effects on the Country’s Terms of Trade
    • Growth Biased toward Replacing Imports in a Large Country
    • Growth That Increases a Large Country’s Willingness to Trade
    • Immiserizing Growth
    • Immiserizing Growth in a Large Country
    • Technology and Trade
    • Individual Products and the Product Cycle

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    Specific Factors Shock Lab

    将《Growth in Only One Factor》对应的理论或政策机制放到贸易分析实验室中做交互式验证。

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