# 经济代写|国际经济学代写International Economics代考|ECON390

## 经济代写|国际经济学代写International Economics代考|A TEST OF COMPARATIVE ADVANTAGE: THE CASE OF JAPAN

The GFT theorem of international trade, as explained in Chapter 2 , rests on the premise that the trade pattern of countries follows their pattern of comparative advantage. However, apart from externality related problems, the comparative advantage doctrine does not extend to the many commodity cases. Hence, it is of interest to examine whether the actual trade pattern conforms with the pattern of comparative advantage or whether there is any systematic divergence between the two. In this context, the correlation version of the law of comparative advantage developed by Alan Deardorff (1980) is quite useful. Deardorff’s analysis asserts that an economy’s net export vector evaluated at autarchy prices is negative. In a two-commodity world this is equivalent to the proposition that the economy will export the good in which it has a comparative advantage measured in terms of relative opportunity cost. Referring to Figure 3.3, note that the country under consideration has a comparative advantage in good X because the opportunity cost of producing its autarchic output level as indicated by the bundle $A$ is assumed to be lower than the opportunity cost of producing good $\mathrm{X}$ abroad. This country thus exports good $\mathrm{X}$ and imports good $Y$. It is then straightforward to check the following inequalities:
$$\sum P_i^a D_i^f>\sum P_i^a X_i^a>\sum P_i^a X_i^f$$
Now, define volume of trade $T_i=X_i^f-D_i^f . T_i>0$ if $i$ is exported and $T_i<0$ if $i$ is imported. Hence, by equation (3.4):
$$\sum P_i^a T_i=\sum P_i^a\left(X_i^f-D_i^f\right)<0$$
Hence, if a country’s trade patlen is consistent with its pallern of comparative advantage, the country’s net export vector evaluated at autarchic prices, $\sum P_i^a P_i$, is negative. Generalizing to the case of more than two goods, the theory asserts that, on average, a country will import what is dear and export what is cheap when evaluated at autarchy prices.

## 经济代写|国际经济学代写International Economics代考|OFFER CURVE OF THE HOME COUNTRY

An offer curve of the home country is defined as the locus of pairs of its export offer and import demand at different TOT that maintain balanced trade. Consider Figure $4.1$ where trade triangles indicating such balanced trade pairs of export offers and import demand are illustrated for two different TOT. For the world relative price of home exports, $P_0^w$, the home country offers to export $a b$ units of cotton textiles in exchange for $a c$ units of import of computers. For a higher relative price $P_1^w$, a larger export offer of $a^{\prime} b^{\prime}$ units of cotton textiles is made in exchange for a larger import demand of $a^{\prime} c^{\prime}$ units of computers.

When these balanced trade pairs of export offer and import demand are plotted in the $(X, M)$ space, the locus connecting such trade pairs or bundles including the bundle $(0,0)$ representing the autarchic situation gives us the offer curve for the home country. This is shown in Figure 4.2. Essentially the triangles $O a b$ and $O a^{\prime} b^{\prime}$ in Figure $4.2$ correspond to the trade triangles $a b c$ and $a^{\prime} b^{\prime} c^{\prime}$ respectively in Figure 4.1. Note that by construction, at any point on the offer curve, trade is balanced for the home country. Thus, the home offer curve is essentially a locus of its trade balance condition: $p^w M=X$.

The slope of the home country’s offer curve $O H$ at the origin is the autarchic relative price of textiles. On the other hand, the slope of the ray connecting any point along the offer curve $O H$ and the origin gives us the corresponding post-trade relative price or TOT. Nule that as the slope of any ray through the origin in the $(X, M)$ space is the ratio $\frac{M}{y}$, so a steeper TOT line means that the home country can exchange a larger amount of imports for the same amount of exports. That is, the world relative price of home exports is now higher. Alternatively, the world relative price of home imports is now lower. TOT thus improves for the home country (and worsens for the foreign country). Similarly, a flatter TOT line indicates a TOT deterioration for the home country (and improvement for the foreign country).

The upward slope of the offer curve $\mathrm{OH}$ reflects that a larger volume of import demand requires a larger export offer by the home country to finance it. On the other hand, the convex downwards (or more specifically, convex to the home export axis) shape of the home offer curve as depicted in Figure $4.2$ reflects two things. First, a larger volume of exports is offered only at a higher relative price of exports, that is, only when TOT improves. The reason is simple.

## 经济代写|国际经济学代写International Economics代考|A TEST OF COMPARATIVE ADVANTAGE: THE CASE OF JAPAN

$$\sum P_i^a D_i^f>\sum P_i^a X_i^a>\sum P_i^a X_i^f$$

$$\sum P_i^a T_i=\sum P_i^a\left(X_i^f-D_i^f\right)<0$$

## 经济代写|国际经济学代写International Economics代考|OFFER CURVE OF THE HOME COUNTRY

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