Papers Received in 2000
Preferential Trade Arrangements, Induced Investment, and National Income in a Heckscher-Ohlin Model
J.F. Francois, Erasmus University
M. Rombout, Tinbergen Institute
Abstract: We develop a Heckscher-Ohlin-Ramsey model, combining dual techniques with classic geometric techniques from trade theory. This framework is used to explore the long-run general equilibrium effects of regional integration (preferential trade agreements). Emphasis is placed on positive mechanics related to adjustment in the capital stock, long-run changes in the pattern in trade, and the implications for changes in long-run (steady-state) national income. The importance of relative country size and the dynamic implications for third countries are also addressed.
Keywords: regionalism; trade and investment; preferential trade arrangements; Heckscher Ohlin Ramsey model; trade and growth
Download the paper; Contact address: francois@few.eur.nl
Victims of Progress: Economic Integration, Specialization, and Wages for Unskilled Labor
J.F. Francois, Erasmus University
D. Nelson, Tulane University
Abstract: In this paper we demonstrate that intra-industry trade (or FDI) between identical countries could produce the observed deterioration in the relative wages of unskilled workers. This involves a model of North-North integration through either increased trade flows or increased MNE-based production. Our motivation in this regard is arguments to the effect that trade cannot be responsible for the observed labour market trends because trade with developing countries is quantitatively too small to have significant labour market effects. We also introduce a relatively unexploited class of model that possesses attractive properties with respect to the explicit incorporation of firm-theoretic considerations in trade models.
Keywords: trade and wages; trade and employment; FDI and wages; globalization and employment
Download the paper; Contact address: francois@few.eur.nl
Economic Geography and Comparative Advantage
R. Forslid, University of Lun
d and CEPRI. Wooton, University of Glasgow and CEPR
Abstract: We return to a familiar topic in international trade, comparative advantage, introducing it into a model of economic geography. We provide a clear counterexample to the familiar result that trade liberalization leads to increased industrial concentration. Instead, lower trade costs may lead to a dispersion of production. As trade barriers diminish, agglomerative forces weaken, leaving room for other influences on the location of production. When a pattern of comparative advantage exists, integration may lead to international specialization of production. This may be good news for peripheral countries, which may be able to retain industry despite the attraction of the core.
Keywords: comparative advantage, economic geography, factor mobility, international trade
Download the paper; Contact address: rikard.forslid@nek.lu.se