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Cite as: Pol Antras, course materials for 14.581 International Economics I, Spring 2007. MIT OpenCourseWare (http://ocw.mit.edu/), Massachusetts Institute of Technology. Downloaded on [DD Month YYYY].
Transcript of 1. @ @ .,3;,1.: $14267-.4 %*:
Cite as: Pol Antras, course materials for 14.581 International Economics I, Spring 2007. MIT OpenCourseWare(http://ocw.mit.edu/), Massachusetts Institute of Technology. Downloaded on [DD Month YYYY].
Cite as: Pol Antras, course materials for 14.581 International Economics I, Spring 2007. MIT OpenCourseWare(http://ocw.mit.edu/), Massachusetts Institute of Technology. Downloaded on [DD Month YYYY].
Cite as: Pol Antras, course materials for 14.581 International Economics I, Spring 2007. MIT OpenCourseWare(http://ocw.mit.edu/), Massachusetts Institute of Technology. Downloaded on [DD Month YYYY].
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Cite as: Pol Antras, course materials for 14.581 International Economics I, Spring 2007. MIT OpenCourseWare(http://ocw.mit.edu/), Massachusetts Institute of Technology. Downloaded on [DD Month YYYY].
Cite as: Pol Antras, course materials for 14.581 International Economics I, Spring 2007. MIT OpenCourseWare(http://ocw.mit.edu/), Massachusetts Institute of Technology. Downloaded on [DD Month YYYY].
The Small Open Economy Case
Consider �rst the case of a small open economy that faces exogenously givengoods prices pA and pB . In this case we can forget about condition (4). Letus drop country superscripts.
De�nitionAn equilibrium of a small open economy is a production vector X = (XA ,XB ) anda factor-price vector ω = (w , r) such that (1), (2) and (3) are satis�ed.
Why don�t we worry about balanced trade? Walras�Law
De�nitionTechnologies do not feature factor intensity reversals whenever the technology
matrix A =�aLA (ω) aLB (ω)aKA (ω) aKB (ω)
�is non-singular, that is whenever
aLA (ω) aKB (ω) 6= aLB (ω) aKA (ω) for any ω.
Pol Antràs (Harvard & MIT) Lecture 4: The 2x2x2 Heckscher-Ohlin Model: Part I Spring 2007 6 / 12
Cite as: Pol Antras, course materials for 14.581 International Economics I, Spring 2007. MIT OpenCourseWare(http://ocw.mit.edu/), Massachusetts Institute of Technology. Downloaded on [DD Month YYYY].
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Cite as: Pol Antras, course materials for 14.581 International Economics I, Spring 2007. MIT OpenCourseWare(http://ocw.mit.edu/), Massachusetts Institute of Technology. Downloaded on [DD Month YYYY].
Cite as: Pol Antras, course materials for 14.581 International Economics I, Spring 2007. MIT OpenCourseWare(http://ocw.mit.edu/), Massachusetts Institute of Technology. Downloaded on [DD Month YYYY].
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Cite as: Pol Antras, course materials for 14.581 International Economics I, Spring 2007. MIT OpenCourseWare(http://ocw.mit.edu/), Massachusetts Institute of Technology. Downloaded on [DD Month YYYY].
w
r
pA=cA(w,r)
p'A=cA(w,r)
pB=cB(w,r)
Cite as: Pol Antras, course materials for 14.581 International Economics I, Spring 2007. MIT OpenCourseWare(http://ocw.mit.edu/), Massachusetts Institute of Technology. Downloaded on [DD Month YYYY].
λ ˆ λ ˆ ˆ
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Cite as: Pol Antras, course materials for 14.581 International Economics I, Spring 2007. MIT OpenCourseWare(http://ocw.mit.edu/), Massachusetts Institute of Technology. Downloaded on [DD Month YYYY].
L'
KXB
X'A
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XA
X'B
aKB/aLB
aKA/aLA
Cite as: Pol Antras, course materials for 14.581 International Economics I, Spring 2007. MIT OpenCourseWare(http://ocw.mit.edu/), Massachusetts Institute of Technology. Downloaded on [DD Month YYYY].
