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Appendix to Chapter 6

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International Trade Theory and Policy

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Abstract

The specific factors model (Jones, 1971; Samuelson, 1971) can be conveniently examined we follow (Jones, 1971) extending to the present case the treatment already introduced in Sect. 19.5 for the traditional case. Equations (19.59) have to be modified to take account of the presence of specific factors.

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Notes

  1. 1.

    Remember that, in general, a production function gives the maximum quantity of output for any given combination of inputs. This maximum, in the case of ordinary production functions, such as Eqs. (22.25), is set for us by the state of technology, while in the case we are examining, in which we are trying to cause the intermediate goods to disappear, it is necessary to solve a further problem, that of the efficient allocation of resources.

  2. 2.

    Still making use of the method of comparative statics, it is possible to obtain explicit expressions for the partial derivatives of the N A function and to show that it is homogeneous of the first degree. See, for example, Chacholiades (1978, pp. 231–232).

  3. 3.

    As the intermediate good is produced exclusively with primary factors, it shows no distinction between apparent and total coefficients or between apparent and total factor intensities.

  4. 4.

    For the two classifications to coincide even in this case, it is necessary for the final commodity, with a capital/labour ratio between the capital/labour ratio of the intermediate good and the capital/labour ratio of the other final good, to have an intensity of use of the intermediate good equal to or greater than that of the other final good. This can be demonstrated by starting from Eqs. (22.32) and afterwards examining the appropriate inequalities.

    It is as well at this point to note that, in the model previously examined (A and B are used both as final and intermediate goods) the two classifications necessarily coincide: see Vanek (1963).

  5. 5.

    In the text we assumed that A is the imported commodity, but this has no effect on the conclusions.

  6. 6.

    Since these effects also involve the demand for N—as we shall find from (22.65)—it can be seen at once that it is now no longer possible, as in the traditional model given in Chap. 3 and Appendix, to consider the productive side of the model separately from the demand side.

  7. 7.

    For the complications introduced by the effects that a changed income distribution at a constant price of N has on spending on N see Corden (1984a, fn. 5 on p. 361).

  8. 8.

    It is as well to point out that we use “real wage” in the sense of wage expressed in terms of the product; the real wage expressed in terms of wage-earners’ purchasing power will be examined later.

  9. 9.

    Equation (27.19) has been used rather than (27.20), because, as will be seen, \(\partial I_{A}/\partial \gamma = 0\) and thus the passage from the first to the second expression is not valid in this case.

  10. 10.

    It is as well to observe that the extension of this theorem from the deterministic case to one with uncertainty is valid only if the physical definition of relative abundance is used, whereas if the definition in terms of relative factor prices is used, then such an extension is no longer valid.

  11. 11.

    To symplify analysis we use the relative price of commodity A instead of that of B as we did in Sect. 6.10.

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  1. Accademia Nazionale dei Lincei Classe di Scienze Morali, Rome, Italy

    Giancarlo Gandolfo

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Gandolfo, G. (2014). Appendix to Chapter 6. In: International Trade Theory and Policy. Springer Texts in Business and Economics. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-37314-5_22

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  • DOI: https://doi.org/10.1007/978-3-642-37314-5_22

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