Abstract

In the comparative-statical calculations of the simplest two-commodity barter theory of international trade, the outcomes invariably depend on the magnitude of the sum of the two import-demand elasticities, one relating to the country under study (the ‘home’ country) and the other to the rest of the world (collectively, the ‘foreign’ country); in particular, the response of a variable to a disturbance will be in one direction if the sum of elasticities is less than minus one and in the opposite direction if the sum is greater than minus one. On the other hand, for some dynamic or ‘disequilibrium’ models of international trade it is a necessary and sufficient condition of local stability that the same sum of elasticities be less than minus one. Let us define Δ as one plus the sum of the two elasticities of import demand. Then the so-called Marshall–Lerner condition requires that Δ be negative. Evidently the condition provides a link between the comparative-statics of international trade and some forms of trade dynamics. That such a link exists is, of course, the essence of Samuelson’s Correspondence Principle.