A Model of the Terms of Trade and Economic Growth

  • James A. Hanson
Part of the Lecture Notes in Operations Research and Mathematical Systems book series (LNE, volume 59)


The single country model described in Chapter Two can easily be modified for use in analyzing international trade. Assume the parameters of demand and the production functions in each country are given.2 Define M i j as the net imports of good i (i = M,A) by country j, and let
$$m_{i{\kern 1pt} }^j{\mkern 1mu} = {\mkern 1mu} M_i^j/L_i^j{\mkern 1mu} for{\mkern 1mu} j{\mkern 1mu} = {\mkern 1mu} (\alpha ,{\mkern 1mu} \beta ). $$
We shall assume balanced trade so exports are simply negative imports. Also, it will be assumed there are no transportation costs.


Demand Function Capital Accumulation Relative Price Complete Specialization Agricultural Good 
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  1. 30.
    B. Minhas, An International Comparison of Factor Costs and Factor Use, Amsterdam, 1963; R. Arrow, H. Chenery, B. Minhas, R. Solow, “Capital-Labor Substitution and Economic Efficiency,” Review of Economics and Statistics, August, 1961, pp. 225–250.Google Scholar

Copyright information

© Springer-Verlag Berlin · Heidelberg 1971

Authors and Affiliations

  • James A. Hanson
    • 1
  1. 1.Department of EconomicsBrown UniversityProvidenceUSA

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