CHAPTER 7
ECONOMIC GROWTH AND INTERNATIONAL TRADE
OUTLINE
7.1 In troduct ion
7.2 Growth of Factors of Product ion
7.2a Labor Growth and Capital Accumulati on Over Time
7.2b The Rybcz yn ski Theorem
7.3 Tech ni cal Progress
7.3a Neutral, Labor-Sav ing, and Capital-Savi ng Tech ni cal Progress
7.3b Technical Progress and the Nation's Production Frontier
Case Study 7-1: Chan ges in Relative Resource En dowme nts of Various Coun tries and Regi ons
Case Study 7-2: Change in Capital-Labor Rati ons in Selected Coun tries
7.4 Growth and Trade: The Small Co un try Case
7.4a The Effects of Growth on Trade
7.4b Illustrati on of Factor Growth, Trade, and Welfare
7.4c Tech ni cal Progress, Trade, and Welfare
Case Study 7-3: Growth of Output per Worker from Capital Deepe ning, Tech no logical
Chan ge, and Improveme nts in Efficie ncy
7.5 Growth and Trade: The Large-Co untry Case
7.5a Growth and the Nati on's Terms of Trade and Welfare
7.5b Immiserizi ng Growth
7.5c Illustration of Beneficial Growth and Trade
Case Study 7-4: Growth, Trade, and the Gia nts of the Future
7.6 Growth, Change in Tastes, and Trade in Both Nati ons
7.6a Growth and Trade in Both Nations
7.6b Change in Tastes and Trade in Both Nations
Case Study 7-5: Change in the Revealed Comparative Advantage of Various Countries or Regi ons
Case Study 7-6: Growth, Trade, and Welfare in the Leadi ng In dustrial Nati ons
Appe ndix: A7.1 Formal Proof of Rybcz yn ski Theorem
A7.2 Growth with Factor Immobility
A7.3 Graphical An alysis of Hicksia n Tech ni cal Progress
An titrade product ion and con sumpti on Neutral product ion and con sumpti on Normal goods
In ferior goods Key Terms
Comparative statics Dyn amic an alysis Bala need growth
Rybcz yn ski
theorem
Labor-sav ing tech ni cal progress Capital-
sav ing tech ni cal progress Protrade
producti on and con sumpti on Lecture Guide
1. This is not a core chapter and it is one of the most challenging chapters in international trade
theory. It is in cluded for more adva need stude nts and for complete ness.
2.
If I were to cover this chapter, I would prese nt two sect ions in each of three lectures. Time
permitting, I would, otherwise cover Sections 1 and 2, paying special attention to the Rybcz yn ski theorem. An swer to Problems
1. a) See Figure 1.
b) See Figure 2
c) See Figure 3.
2.
See Figure 4. 3. a) See Figure 5.
b) See Figure 6.
c) See Figure 7.
4. Compare Figure 5 to Figure 1.
Compare Figure 6 to Figure 3. Note that the two product ion fron tiers have the same vertical or Y intercept in Figure 6 but a different vertical or Y intercept in Figure 3.
Compare Figure 7 to Figure 2. Note that the two product ion fron tiers have the same
horiz on tal or X in tercept in Figure 7 but a differe nt horiz on tal or X in tercept in Figure 2.
5.
See Figure 8 on page 66. 6.
See Figure 9. 7.
See Figure 10. 8.
See Figure 11. 9.
See Figure 12. 10. See Figure 13 on page 67.
Terms-of-trade effect Wealth effect Immiseriz ing growth
11. See Figure 14.
12. See Figure 15.
13. The Un ited States has become the most competitive economy in the world since the early
1990' s while the data in Table 7.3 refers to the 191590 period.
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