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A clockwork economy

A clockwork economy. A three-dimensional trade model imbedded in the general equilibrium theory Koen Smet – Institute of International Economics and Development 2 nd FIW-Research Conference – International Economics. Structure.

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A clockwork economy

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  1. A clockwork economy • A three-dimensional trade model imbedded in the general equilibrium theory • Koen Smet – Institute of International • Economics and Development • 2nd FIW-Research Conference – International Economics

  2. Structure • South Africa´s trade structure with the EU and China and its evolution between 1993-2006. • New classification measure • A three dimensional trade model • Basic structure • Factor intensity • A graphical solution • The endowment triangle • Triangles of diversification • Conclusion

  3. The evolution of the South African trade structure 1993-2006

  4. Dynamic analysis: new approach Intra-into (2%) Intra industry Brül Intra-intra (9%) Intra-out of (6%) Trade Date GL Inter Adv. Inter-into (+) (8%) Brül Inter-intra (+) (8%) Inter industry RCA Inter-out of (+) (8%) Inter-into (-) (6%) Inter Disadv. Brül Inter-intra (-) (21%) Inter-out of (-) (32%) Folie 4

  5. Revealed Comparative AdvantagesGeneral

  6. Export Flows – Matrix Classification

  7. Results of the empirical analysis • General findings • Grubel-Lloyd index • Trade specialisation between 1993 and 2006 • Trade Flows • Imports (EU): Medium and high-technology products, whose production is labour- or capital-intensive • Imports (China): Labour-intensive, low- and medium-technology consumer goods • Exports: Primary resource-based manufactures (cf. mining and quarrying industries) and low-technology capital-intensive manufactures

  8. Theoretical Model - Inspiration • Literature: • Samuelson (1953) • Chipman (1966 / 1969) • Batra (1970) • Jones and Scheinkman (1977) • Chang (1979) • Takayama (1981) • Ethier (1984) BUT: Focus on the mathematical solvability of the model and the generalisation of the 2x2x2 theorems.

  9. Theoretical Model - Assumptions • Basic structure • Three production factors: L, H and K • Three industries • Three countries: South Africa, EU and China • Further assumptions • Zero-Profit condition • Market-Clearing condition

  10. Theoretical Model – Factor Intensity • Double bilateral comparison is not applicable • The ratio of the distributive share of a certain factor within a specific industry and this factors overall distributive share

  11. The Endowment Triangle • Literature • McKenzie (1955) • Leamer (1987) • Jones and Marjit (1991) • Jones (1992 / 2005)

  12. Graphical solution – The concept of the endowment triangle

  13. Endowment triangle - Application

  14. Triangles of diversification

  15. Import and export flows

  16. Concluding remarks • During the period 1993-2006 specialisation was the dominant trend within the South African trade structure. • The concepts of endowment triangles and of triangles of diversification allow for the construction of a three-dimensional Heckscher-Ohlin-Samuelson trade model. • Further research should concentrate on: • a discussion of the input-vectors. • a comparative static analysis between autarky and free trade. • the empirical justification of educated assumptions.

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