The Theory of International Trade

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  • Format: Hardcover
  • Copyright: 1999-03-08
  • Publisher: Palgrave Macmillan

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This book seeks to develop an alternative paradigm of the theory of international trade. The mainstream neoclassical theory, which is based on the Hecksher-Ohlin-Samuelson theorem, is shown to be both logically contradictory and to fail to explain the real world. This theoretical and empirical refutation justifies the search for a new approach. Branko Horvat's approach is based on applying and developing the theory of value, to develop an approach which starts by analysing the economic system rather than with the behaviour of individual agents. The result is a systemic approach to international trade, developed in a concise, clear and empirically relevant way.

Author Biography

Branko Horvat was born in Petrinja, Croatia. As a boy he participated in the partisan guerrilla against fascist invaders, and was then educated in economics, philosophy and sociology at Zagreb University, London School of Economics and Manchester University, where he took his second doctorate. He completed his post-doctoral studies at the Massachusetts Institute of Technology and Harvard University. He held fellowships at Manchester University, Ford Foundation and Fulbright. He has been Chief Methodologist at the Federal Planning Bureau and a Member of the Federal Economic Council. He was Founder and Director of the Institute of Economic Sciences and Founding Editor of Economic Analysis. He was also Founding President of the International Association for the Economics of Participation. He has been adviser to several governments, and guest professor at a dozen universities, including Cambridge, Paris, Michigan, Yale and Berkeley. His work has been translated into fifteen languages.

Table of Contents

List of Figuresp. viii
Prefacep. ix
List of Symbolsp. xiv
List of Abbreviationsp. xvi
Introductionp. 1
The Mainstream International Trade Theory
The Evolution of International Trade Theoryp. 7
The Heckscher-Ohlin Theoryp. 10
Preliminariesp. 10
The Heckscher-Ohlin Theoremp. 12
The Factor-Price Equalization Theoremp. 15
The Stolper-Samuelson Theoremp. 21
The Rybczynski Theoremp. 22
Critiquep. 24
The validity of underlying assumptionsp. 24
The validity of neoclassical economic theoryp. 27
Empirical evidencep. 28
The Evaluation of the Heckscher-Ohlin theoryp. 29
Appendices to Part Ip. 32
Empirical evidencep. 32
Leamer's attempt at reconciliation of the theory with factsp. 33
The Systemic Theory of Value
Diachronic vs Synchronic Labour Input: The Two-Century Old Misunderstandingp. 39
The Employment Effectp. 42
The Replacement Effectp. 45
The Interplay of Employment and Replacement Effectsp. 50
The Traversep. 54
The Basic Three-Industry Model
Steady Statep. 59
Integrated world economyp. 59
Open economyp. 62
Growing economyp. 63
The Wage-Rental Curvep. 67
Appendix to the Part IIIp. 70
A note on price movementsp. 70
An Alternative Theory
Three Modelsp. 75
The two received modelsp. 75
An alternative model of international tradep. 77
Comparative advantagep. 79
Intra-Industry Tradep. 82
Four Hypothesesp. 85
Comparative advantage hypothesisp. 85
Two commoditiesp. 85
Many commoditiesp. 88
Equalization of factor prices hypothesisp. 89
Hypothesis about the changes due to the opening of tradep. 90
Increased factor supply specific effectp. 92
The Gains from Trade
The Pattern of Specializationp. 95
Given autarkic pricesp. 95
Primary and secondary specializationsp. 99
The Gains from Tradep. 104
Autarky vs. tradep. 104
Domestic and international pricesp. 106
Import and export gainsp. 108
Wage-rental curve againp. 111
Unequal Exchangep. 116
Marxian valuesp. 116
Unequal exchange Ip. 118
Unequal exchange IIp. 120
Tariffs and Subsidiesp. 125
Effects of a tariff in a single marketp. 125
Prohibitive tariff and subsidyp. 127
The pattern of specialization with tariffp. 127
Nominal and effective tariffsp. 129
Subsidiesp. 132
Infant industry supportp. 133
Customs Unionp. 136
Degrees of economic integrationp. 136
Trade creation and trade diversionp. 137
Customs unions in a more realistic settingp. 140
Dynamic effectsp. 144
Appendices to Part VIp. 150
Empirical evidencep. 150
Economic integration of Eastern Europe: The Project Bridgep. 155
Introductionp. 155
The Organizationp. 160
The Customs Unionp. 162
The Monetary Unionp. 172
Notesp. 190
Referencesp. 192
Name Indexp. 197
Subject Indexp. 199
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