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A CRITICAL EVALUATION OF TRADE THEORIES
The validity of trade theories
Several studies have investigated the validity of the classical trade theories. The evidence collected by
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100.00 (1) USA 1 86.547 (3) AUSTRALIA 2 84.123 (2) CANADA 3 72.872 (6) MALAYSIA 4 69.768 (4) GERMANY 5 69.283 (7) TAIWAN 6 66.489 (5) UNITED KINGDOM 7 66.407 (9) FRANCE 8 59.758 (8) SPAIN 9 58.416 (13) THAILAND 10 56.303 (11) JAPAN 11 50.813 (12) CHINA MAINLAND 12 47.787 SAO PAULO 13 47.354 ZHEJIANG 14 46.476 (10) KOREA 15 44.499 (20) COLOMBIA 16 44.310 (14) ITALY 17 43.877 (16) SOUTH AFRICA 18 42.507 MAHARASHTRA 19 42.181 (17) INDIA 20 40.667 (15) BRAZIL 21 37.851 (18) PHILIPPINES 22 33.636 ROMANIA 23 33.337 (19) MEXICO 24 29.803 (23) TURKEY 25 24.584 (21) RUSSIA 26 21.526 (22) POLAND 27 13.213 (25) INDONESIA 28 100.00 (2) FINLAND 1 98.159 (6) SINGAPORE 2 92.363 (4) DENMARK 3 90.311 (10) HONG KONG 4 89.730 (3) SWITZERLAND 5 88.683 (5) LUXEMBOURG 6 87.142 (7) SWEDEN 7 86.475 (1) NETHERLANDS 8 83.377 (11) ICELAND 9 82.579 (8) AUSTRIA 10 79.355 (9) IRELAND 11 75.761 (12) NORWAY 12 74.557 (13) BELGIUM 13 72.198 (14) NEW ZEALAND 14 67.003 ILE-DE-FRANCE 15 61.542 (15) CHILE 16 59.781 (16) ESTONIA 17 57.520 BAVARIA 18 56.060 RHONE-ALPS 19 52.243 CATALONIA 20 45.554 (19) CZECH REPUBLIC 21 43.567 (17) ISRAEL 22 42.463 (18) HUNGARY 23 41.391 LOMBARDY 24 35.174 (20) PORTUGAL 25 34.174 (21) GREECE 26 30.288 (23) SLOVAK REPUBLIC 27 12.464 (26) ARGENTINA 29 9.811 (24) VENEZUELA 30 29.170 27.768 (22) SLOVENIA 28 JORDAN 29
Figure 2.4 The world competitiveness scoreboard (larger nations), 2002 rankings are in brackets Source: IMD World Competitiveness Yearbook 2003, 4. Figure 2.5 The world competitiveness scoreboard (smaller nations), 2002 rankings are in brackets Source: IMD World Competitiveness Yearbook 2003, 4.
MacDougall shortly after World War II showed that comparative cost was useful in explaining trade patterns.11 Other studies using different data and time periods have yielded results similar to MacDougall’s. Thus there is support for the claim that relative labor productivities determine trade patterns. These positive results were subsequently ques- tioned. The studies conducted by Leontief revealed that the USA actually exports labor-intensive goods and imports capital-intensive products.12 These paradoxical findings are now called the Leontief Paradox. Thus, the findings are ambiguous, indi- cating that, in its simplest form, the Heckscher– Ohlin theory is not supported by the evidence. In theory, the more different two countries are, the more they stand to gain by trading with each other.There is no reason why a country should want to trade with another that is a mirror image of itself. However, a look at world trade casts some doubt on the validity of classical trade theories. Developed countries trade more among themselves than with developing countries. There is a tendency for cor- porations in developed countries to prefer to form direct-investment ties in the other more stable, developed countries while avoiding heavy invest- ment in the fast-growing developing world. The trade pattern shown is surprising theoreti- cally, because advanced economies have similar climate and factor proportions and thus should not trade with one another since there are no compar- ative advantages. Apparently, other variables in addi- tion to factor endowment play a significant role in determining trade volume and practices because considerable trade does occur between developed nations.
Date: 2014-12-21; view: 1170
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