Theories of international trade of Heckscher - Olin, the contribution...

Theories of international trade of Heckscher - Olin, Samuelson's contribution, the paradox of Leontief et al.

Below is a more detailed analysis of these issues, implemented by Paul Samuelson in the presentation of Mark Blaug.

Samuelson's theorem on the leveling of factor prices. Many theorists have not noticed what Blaug testifies: the Heckscher-Olin model is more indebted to several articles published by Samuelson in the late 1940s the beginning of the 1950s, than the provisions of the basic article of Heckscher (1919), updated and expanded in the work of "Interregional and International Trade" Olin (1933). Heckscher and Olin assumed that to the extent that international trade replaced the movement of factors between countries, free trade would equalize the degree of the rarity of factors and, consequently, the prices for them around the world; while Olin saw good reason to believe that this process will not end in absolute alignment. Samuelson, however, proved the theorem on the leveling of factor prices: under certain special conditions (modern competition, zero transportation costs, incomplete specialization, the same homogeneous production functions, the absence of external savings, the constant relative intensity of the use of factors for all of them relative prices, the uniformity of factors in terms of quality, and the number of factors not exceeding the number of goods), free trade will lead to complete, and not partial, leveling of the prices of factors. This elegant formulation was, according to Blaug, subsequently generalized to n countries, n factors and n goods, which can not be said about the Heckscher-Olin theorem, which to this day remains a theorem for the case of two countries, two factors and two goods.

The Leontief Paradox. Professor Vasily Leontiev almost nullified the Heckscher theory - Olin already in the 1950s, when he published the work with his famous "cost table" , relating to the structure of US foreign trade. He found that the country exported relatively labor-intensive goods in direct contrast to what we might expect under the Heckscher-Ohlin theory. Subsequently, his conclusions were called the "Leontief Paradox", and although not all theoreticians perceived this paradox as true, but they, including Paul Samuelson, recognized the elegance of the presentation of facts and the flawlessness of logic.

In this regard, Charles Kindler wrote: "He (Leont'ev .- R. X.) proves not that the United States is poor in capital and rich in manpower, but that Heckscher's theorem is Olina is invalid. Most trade theorists continued to refine the obviously refuted theory of factor proportions, increasingly puzzled by the flow of technical puzzles generated by the Leontief paradox. For example, what is the factor of production and how many individual factors are involved in the production processes? Can the reversal of the intensity of the factors be excluded in a multifactor world? What conditions are necessary to comply with the theory of factor price equalization as the number of factors increases?

The end of the research program Olin - Samuelson and the paradox of Leontiev. According to M. Blaug, the paradox of Leontiev is not put an end to the research program of Olin-Samuelson. Moreover, most of the new discoveries made within the Olin-Samuelson approach were not facts, but rather analytical generalizations of the phenomena of international and domestic trade. This approach contributed to the popularization of a simplified theory of marginal productivity around which all postwar discussions on distribution problems revolved: the international trade model, which explains it with factor proportions, stimulated the teaching of allegories with two countries, two commodities and two factors with aggregated production functions, with constant returns from scale. Thus, the analysis of domestic and international trade was unified with the help of a greatly simplified aggregate theory of general equilibrium, which promised more than it was capable of giving. At the same time, according to M. Blaug, the Olin-Samuelson approach should not be separated or contrasted with the wider Hicks-Samuelson general equilibrium model. According to M. Blaug, ironically, much of this work was stimulated and popularized by Samuelson's efforts - the main defender of operationalism in economic theory, at least in the early years of his research. As one of the commentators remarked: "The whole discussion (about the leveling of the prices of factors) is itself - well or wrong - an example of non-operational theorizing". Samuelson wholeheartedly acknowledged that the differences in factor prices observed in the real world are likely to be highly divergent from the idealized picture of the aligned price factors in statistically competitive conditions. Nevertheless, he persistently continued his research on the theory of leveling factor prices, being deeply convinced that it "really contributes to an understanding of the forces shaping the face of world trade". Mark Blaug made the following conclusion from this: "The discussion about the alignment of factor prices was an intellectual fun. Although at times it gave some useful results, clarifying the structure of the pure theory ... leading to the interesting conclusion that in certain circumstances, trade may not cause even a tendency to equalize the prices of factors, the fact remains that no decision-making politician ever wanted to know will give whether free trade is any meaningful decision of statistical or any other problems of the real world. "

Additional research of the problem. The empirical validity of the Heckscher-Olin theory was intensively studied in numerous studies, most of which, since Leontief's time, led to a refutation of the theory. Robert Stern wrote: "A simple Heckscher model - Olin has no serious empirical evidence. If we explicitly take into account natural resources and human capital, the model allows us to understand more ... [nevertheless] it seems that the inter-country differences in efficiency are sufficiently convincingly proved, and this makes the universal empirical applicability of the hypothesis of endowment by factors extremely unlikely. "

According to R. Stern, the explanation of trade through the product life cycle, technological gap and economies of scale proved to be somewhat better, but the familiar problems of comparing less rigorous predictions of quasi-dynamic models with rigorous predictions of statistical models, especially if the latter are accompanied by various additions ad hoc, do not allow us to talk about the decisive victory of one or the other party. As for theory, the problem is that the model of endowment with factors has yet to be systematically integrated with the mechanism for creating and disseminating technologies.

It is also believed that the main mistake in the Heckscher-Olin theory is the assumption about the homogeneity of the factors of production, while in reality even such a factor as the qualification of the workforce is different both within the country and in different countries. However, taking into account the different groups of labor and capital invested in the training of these groups, the Heckscher-Olin factor of production ratio theory is attractive due to the differentiated approach to the level of countries' supply with production factors. At the same time, the obvious weakness in the theory of these analysts is the ignoring of the fundamental provisions of the Ricard-Marx value theory, the absolutization of the role of market factors in the formation of prices. Hence - the possibility of ignoring the real costs of labor at the final price and, accordingly, the "legalization of speculation," which plays a particularly important role in the activity of market agents in modern conditions, deforming the market equilibrium.

The model of specific factors of foreign trade. This model was developed by P. Samuelson and R. Jones as a "concomitant result" when checking the model Olin. The essence of this approach is the following: on the basis of the Ricardian model, in which the economy conditionally produces two goods and, accordingly, labor can be used in two branches, the model in question is based on the existence of other factors of production, besides the factor of labor .

Work is considered as a "mobile factor" capable of moving from one industry to another, but other specific factors can not move, because they are used only in the production of goods in certain industries. Π. R. Krugman and M. Obstfeld, to illustrate this proposition, propose to consider the economy of the country in which two types of products are produced - industrial goods and food. The presence is of three factors of production: labor ( L ), the capital (K) and the land (T). In the manufacture of industrial goods, labor and capital are consumed (the land is consumed); in the production of food products, labor and land are used, but there is no capital. Here labor is an mobile factor that is applied in any of the sectors, and land and capital are specific factors that can be used only in the production of one kind of goods. On this basis, the production function is revealed as the ratio between the quantities (volumes) of labor and capital employed, showing how much output will be received at given labor and capital outlays. Production functions for each of the sectors have their own formulas.

I. For the sector of manufactured goods:

Output of manufactured goods ( Qm ) = Capital costs (K) + Labor costs (Lm).

II. For the food sector:

Release of food (Qf) = The amount of land (T) + Labor costs in food production ( Lf ).

III. For the economy as a whole, the total amount of labor (L) is as follows:

Lm + Lf = L3.

Analysis of production functions for each of the sectors of the economy makes it possible to identify the production capabilities of each of the factors, i.e. the output of manufactured goods (the marginal product of labor). This is a kind of source base, which creates economic prerequisites for foreign trade. Another condition necessary for this realization is the existence of different relative prices for goods (in this case industrial products) between the exporting country and the importing country. This is the postulate that underlies all foreign trade, since the absence of a difference in the relative prices of goods makes foreign trade fundamentally impossible.

Theory of the product's life cycle. This is the theory of the world trade in finished products based on the stages of the product's life cycle. She argues that some types of goods (products) go through a cycle consisting of four stages: introduction, growth, maturity and decline. Accordingly, the production of such a product moves from country to country, depending on the stage of the cycle. These stages are closely connected with each other, representing a certain continuum. The corresponding changes (in stages) are presented in Table. 6.1.

Table 6.1

Product Lifecycle Theory *

Metrics

Life Cycle Stages

Implementation

Growth

maturity

Decline

Production Location

In the country of innovation (usually industrialized)

In the country of innovation and other industrialized countries

In many countries

Mostly in developing countries

Market Placement

Mostly in the country of innovation with some exports

Mostly in industrialized countries. The shift to export markets as foreign production replaces exports in markets with fast-growing demand

Growth in developing countries: some decline in industrialized countries; general stabilization of demand

Mostly in developing countries. The general decline in demand

Specific factors

Almost a monopoly position. Sales are based on uniqueness, not on the price of the previous product

The number of competitors is increasing. Some competitors start to reduce prices. The product becomes more standardized

The number of competitors is decreasing. Price is important, especially in developing countries

Price is the key weapon. The number of manufacturers continues to decline

Production technology

Small-scale production. Implementation of methods that ensure the improvement of the goods. High labor intensity and high qualification. Relatively low capital expenditures

Increased capital outlays, more standardized methods

Large-scale production with high capital costs. High standardization. Less skilled labor is required

Unskilled labor for mechanized large-scale production

* Daniele D.D. International Business/D.D. Daniels, L. X. Radeba. Moscow: Delo Ltd, 2001. P. 133.

Stage 1 - implementation. This stage includes the development of innovation as a reaction to the established need; production and marketing of new goods within the country; export of new goods from the country. It is also noted that in the last decades the United States is the leading country in initiating the release of most new products and technologies, although other industrially developed countries make an outstanding contribution, primarily Japan. This fact allows us to understand the Leontief paradox, which shows that the US exports mostly labor-intensive products. Since wage rates in the US are among the highest in the world, the question arises as to the competitive positions of such American goods on the world market. One explanation is that the monopoly position of commodity producers allows them to shift costs to those consumers of a new product who do not want to wait for a possible reduction in the price of this product.

Stage 2 - growth. When a product is introduced into production and its sale begins, then for competitors there is an incentive to act, which violates the position of the monopolist. As a rule, an insignificant change in the goods is introduced and, thus, the patent protection of the new product is overcome. At the same time, demand is growing, including in other countries, and primarily in the markets of developed countries. This is how the market is expanding - both through exports and through the creation of new enterprises in different countries.

Stage 3 - maturity. At the maturity stage, the world demand for the product is leveled, although in some countries production and sales can increase, and in others - a decline. But, as a rule, at this stage there is a replacement of primary producers, as product models become highly standardized, and their cost is an important tool for competition. A large-scale production of foreign manufacturers begins, which reduces the cost of a unit of production, and then a lower cost makes it possible to increase sales in developing countries. As markets expand and technology spreads, the country of innovation gradually loses its manufacturing advantages. There are incentives to transfer enterprises to developing countries, in which there is less qualified, but relatively cheap labor. This allows us to establish a profitable and efficient production of goods that are in demand.

Stage 4 - decline. At this stage, markets in developed countries gradually reject goods, they begin to fold; wealthy people prefer new products. By this time, all production is concentrated in developing countries, and they supply the tapering markets of developed countries with related products.

The theory of the similarity of countries. This theory is based on the following idea: having developed a new product for sale in accordance with the needs of the domestic market, the firm owner of this product, entrenched in its ; market, subsequently enters the markets with similar products of other countries. Since most new products are manufactured in developed countries and sold on domestic markets (taking into account their needs), they mostly revolve in the giant markets of the developed countries themselves; high quality and, accordingly, high cost do not allow them to penetrate intensively into the markets of the second and third world. But in the markets of the latter, goods are replaced by surrogates thrown at these markets in huge volumes, imitating the goods of the markets of post-industrial countries, or corresponding manufactures from developed countries are transferred here when their markets are saturated with products that are no longer in demand, as discussed earlier. >

Here, however, not only the factor of production and supply of goods is important, but also the demand factor. Without the correspondence of these factors, which for centuries were established spontaneously, there can be no full-fledged world trade. Conformity here means equilibrium in world trade, a balance between supply and demand. Unlike the balance in one country at the world level, there is a complex account of factors of dependence and interdependence: the production capabilities of one (the first) country come into contact with the possibilities of consumption by the second country of a certain part of the commodity product (and services) produced by the first country, etc. This approach is the basis for the development of international trade problems, in particular the concept of the "marginal replacement level," which plays a key role in developing a standard model of world trade. Actually, this is the idea of ​​balance (balance) of world trade, which in the final form (in the modern sense) was formulated by the British economist A. Marshall (author of the concept of marginal utility) as a theory of general equilibrium. Previously, it was described by J. St. Millham, F. Edgeworth, a representative of the marginalist school, and later J. Mead, who investigated the movement of capital and world trade, contributed to its development.

The key concept in this theory is mutual demand, ie. an indicator that synthesizes demand and supply, illustrating the necessary quantity of imported goods, which is required by the country in order to provide an appropriate quantity of other goods for export. Thus, the volume of world trade is the difference between domestic production of a product and its consumption. When production is more consumption - the country exports, when it is less - the country imports.

Accordingly, if Q1 and Q2 are the volumes of production (or supply) of goods 1 and 2, a D1 and D2 - consumption (demand) of goods 1 and 2, then Q1-D2 - export of goods; D2-Q2 - import of goods 2. Proceeding from the fact that the theory of world trade rests on the concept of relative price, the import of goods 2 should be equal to the export of commodity 1, multiplied by its relative price, as a result we obtain the formula

D2 - Q2 = (Q1 - P1) × P1/P2.

In this case, it is possible to achieve a general equilibrium of the country's foreign trade - the simultaneous balancing of supply and demand for goods in both domestic and international trade.

The theory of comparative advantages and the labor productivity factor: the Balassa model. As early as 1963, the Hungarian economist B. Balassa carried out a comparative analysis of trade between the United States and Great Britain on the basis of the methodology of the theory Ricardo, using the export data of the United States and Great Britain for 26 industries in 1951 and the ratio of sectoral labor productivity in both countries. In Fig. 6.1, where its model is shown, the values ​​of the productivity ratios are plotted along the horizontal axis, and the corresponding indicators for export are on the vertical axis. On both axes, the logarithms of the corresponding indicators are plotted. This does not have any fundamental significance, but it gives a clearer picture in the trade and economic process.

It is known that Ricardo's theory proceeds from the premise that if, for example, labor productivity in any industry is higher in the US, then in this case American firms will export more goods than firms of the same industry in the UK or in another country . This is exactly what we see in Fig. 6.1. The corresponding figures are enough -

The Balassa Model of Comparative Advantages

Fig. 6.1. The Balassa model of comparative advantages

Are closely spaced around some inclined line. While making allowances for the fact that the statistics used in this comparative analysis, like any economic statistics, contain inaccuracies, the results obtained can be considered more than satisfactory.

Balassa confirmed the fidelity of the Ricardian fundamental position, according to which trade is built on comparative rather than absolute advantages. For a year, according to which he was analyzed, the American industry on average was twice as high in productivity as Great Britain. Balass has revealed a common misconception that a country can only export products that it surpasses Britain in exporting all goods from a given sample. The Ricardo model shows, however, that it is not enough to outperform foreign manufacturers in terms of productivity, in order to be able to export the corresponding goods. To do this, the relative productivity in this industry should be higher than in other industries in the same country. Incidentally, Marx claimed the same thing, using data on Britain's broader empirical exports in those industries where the US had a higher relative productivity of labor.

The Balassa model, commonly used in the analysis of the relationship between labor productivity and export-import, shows the influence of the first factor on the level of "foreign trade orientation" industries. However, such an analysis must be distinguished by extraordinary correctness and purity. For example, the level of labor productivity in the commodity sectors of industrially backward countries may be low, sometimes primitive, but these countries can export manufactured products even when it becomes a deficit in the domestic market. Therefore, we are not talking about analysis in any economy at all, but in a market economic system that compares comparable countries and their economies participating in the world market system on the basis of international rules.

thematic pictures

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