Abstract
Let us first consider the consumption effects, which amounts to finding the conditions for the ratio A D ∕ Y to increase, remain unchanged, decrease, where A is the importable.
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- 1.
For simplicity and in accordance with the notation used in the Chap. 19, we henceforth omit the superscript S, so that A and B with no superscript will indicate the quantities supplied (produced), whilst we maintain the superscript D to denote the quantities demanded. It is as well to inform the reader that in what follows, we shall make ample use of the model explained in Chap. 19.
- 2.
It should be recalled that this condition was derived in Chap. 19 on the basis of the assumption that E 2B > 0, i.e. that B is country 2’s importable (and, therefore, that A is country 1’s importable). But the result is unchanged if we assumed the opposite pattern of trade (E 2B < 0, i.e. B is country 2’s exportable, etc.). In this case, in fact, the expression under consideration would become \(E_{2B}\left (1 +\varepsilon _{1} +\varepsilon _{2}\right )\); given (19.45) and account being taken that E 2B < 0, this expression is negative if the expression in the text is negative.
- 3.
This definition is equivalent to the Hicks classification employed in the text, if the elasticity of substitution between the factors is smaller than one (see, for example, Vanek, 1966; see also Allen, 1967; Hicks, 1932; Johnson, 1955). To avoid unnecessary complications we assume this to be the case.
References
Allen, R. G. D. (1967). Macro-economy theory: A mathematical treatment (chap. 13).
Gandolfo, G. (2009). Economic dynamics.
Hicks, J. R. (1932). The theory of wages.
Johnson, H. G. (1955). Economic expansion and international trade.
Jones, R. W. (1965). The structure of simple general equilibrium models.
Vanek, J. (1966). Towards a more general theory of growth with technological change.
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Gandolfo, G. (2014). Appendix to Chapter 13. 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_27
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