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International Economic Relations: LDCs and Economies in Transition
By Dumitru Trifan
1. Introduction........................................................................................................................ 3 2. Genesis.............................................................................................................................. 3 4. Content............................................................................................................................... 5 5.Essence of H-O-S model.......................................................................................................6 6. The theoretical fundaments of international trade.............................................................6 6.1 Factor abundance and comparative advantage................................................................................................7 7. Theoretical and practical developments .................................................................10
........................................................................................................................................... 10 7.1Leontieff Paradox............................................................................................................................................11 8. Historical Destiny.............................................................................................................. 11 11. References:..................................................................................................................... 12
The Heckscher - Ohlin - Samuelson model of International Trade and Theory of Production Factors Proportion 1. Introduction
Transformed into a real "mainstream" neoclassical liberal economic thinking in the interwar period is concerned with refining the analytical tools with which they operate and elegance of expression means. This allows, on the one hand, to make progress in the mathematical formalization of its theoretical approach, but on the other hand, removes the social-political aspects of this problem and determined to give priority to technical issues (technical and economic) of international economic relations.
The new approach to international trade theory approach is the result of a long, almost half a century (1919-1960), to which contributed, in particular, Swedish School of Economics and several representatives of the North American brand of neoclassical school. Model name derives from the name of the Swedish economists Eli Heckecher (1879-1952) and Bertil Ohlin (1899-1979), economist and mordamerican Paul.A.Samuelson (n.1915). Basic Ideas of new model of thinking found in the work of B. Ohlin, "Interregional Trade and International Trade" (1933). In a condensed form, for use by students, they were exposed PASamuelson manual published by the International University under the title "Economics" (1948) and in the shorter editions published by the author in collaboration with W.A.Nordhaus (1989). Very large series of authors who have contributed to the preparation, deepening, model refinement and development of international trade HOS remember: G. Haberler, J. Viner, J.E.Meade, F.W.Taussig, A. Aftalion, K. Lancaster, W.F.Stolper, R.W.Jones, H.G.Johnson, F. Machlup, M.C.Hemp , R.A.Mundell, R.J.Hicks, Q.F.Hamod, G. Myrdal, W. Leontief. Written by J. Bhagwati Istologia under the title "International Trade" (1969), brings together the principal studies that explain the history and genesis of the HOS and refers to the larger studies on this topic, signed by G. Haberler, W.M.Cordon, J. Bhagwati, J.S.Chipman. If we add to these studies published in French (signed by M. bye the G.D Berins, H. Denis, G. Marcy, J. Willer, etc.), we have an approximate picture of the richness of sources and components, and time evolution of the HOS model of international trade. In Romania can be found in this work signed by M. Manoilescu Murgescu C., A. Iancu, N. percent S.Sută-Selejan, etc. G.V.Stoenescu. As the main tendency of modern economic thinking and contemporary liberalism has always relied on several key elements, including: protection of private property as a profit driver for mobile and lucrative activities, hedonism (bigger advantages as low cost), the idea of self-regulation spontaneous market economy based on signals from the oscillation of prices and the state not interfering in the private transactions. On the paradigmatic characteristics, summarized the methodological principle of methodological individualism, as historicism, were grafted some peculiarities of the different generations of liberal (classical, neoclassical, neoliberals, "classical" contemporary) who promoted ideas
Source : “Contemporary Economic Doctrines”, Michael Tudosa, Junimea Publishing House, Romania(Iasi), 1978.
A. the authors neoclassical HOS model built on the foundation of the subjective theory of prices.we put in the beginning. 3. Adhering to the subjective theory of prices (marginal utility theory). relative advantage and mutual advantage in international trade and economic policy of free trade (state interference in economic transactions between private operators). to learn how proportion of goods produced or report is changed in various countries in the world market ("terms of trade") and with what results for the partners involved in the transaction (the relative advantages or disadvantages). To express more clearly and convincingly as quantitative analysis of the relationship 2 Data from: “Economy of International Trade”. but complementary to the modeling concepts of economic development. taking as its starting point the consumer's subjective assessments of utility or satisfaction lo procure a certain quantity of consumption an economic good at a time.printed new features characteristic of these generations successive thinkers. but concerned. have sought and found many points of contact between J. three questions: a) What took this model from earlier liberal thought (particularly from a relative advantage in the Ricardian theory of international trade)? b) What has rejected traditional liberalism? c) What new features make this model in explaining the research and the international division of labor and international trade? The authors of the HOS model are taken from A. A key role in this process had P.Keynes's economic thinking and neoclassical economic thought. These differences might result in an irretrievable breakdown in Western economic thought developed. confirmed by the statistics of our century. Ricardo (via J. Rejecting the theory of value based on work specific to classicism (liberal and Marxist). Series given by neoclassical economists in the U. Ricardo. the most accurate creation of liberalism in the mid-twentieth century in international trade issues.St. Preconditions2 For a easesier explanation and understanding of the HOS model and related theories. This tortuous path model fit and HOS. the authors bring the methodology. relying on the fact.Mill and A. the ideea is that since the actual functioning modern economy requires both micro-scale individual actions and measures at the macroeconomic level. Smith and D. in particular. In these circumstances support HOS model was the theory of price interdependence of all goods sold on the world market (final goods and intermediate goods) as it was presented in the work of G. raised by D. that both capital and labor move frequently between countries. it also needs analysis and microanalysis Keynesian neoclassical concludes that both economic thinking are not opposites. pure economic theory.Mill correction of inequalities of income by state interference in the economy "). Also. these authors were interested not so much the absolute size of content and price. namely: the conception of spontaneous self-regulation of the market economy based on the oscillation of prices and advantages of the division of labor (including the International). Marshall's) at least three basic ideas. However. Specifics on international trade derived HOS model. they rejected the theory of objective value and price based on time spent working to produce goods (and.Samuelson methodological and theoretical.S. but between them. 1972. the theory of antagonism between the incomes of various categories of economic operators as the cost of their practical "concerns of J.St. they pointed out the unrealistic nature hypothesis "international immobility of factors of production". in particular. theory and economic policy on international trade. 4 .M. the concept of comparative cost. Swedish economist Cassel (1918-1924). In the twentieth century economic thought have emerged some reservations wool Keynes's theory and still many arguments in favor of liberalism neoclasicist. implicitly. Romania (Bucharest). Didactic and Pedagogic Publishing.
1978. however. According to this theory. 4.Edgeworth. Smith and D. d) Long-term results of international trade or that it exercised influence on the processes of growth and socio-economic and ecological e) Foreign economic policy (especially trade policy) the world's best countries in the twentieth century. B.W. (large.in which economic goods are exchanged on the world market and the relationship between costs and prices. on international trade more space and in-depth knowledge and mathematical economics. Content 3 The HOS model has tried to answer many questions about international trade. 5 . Ricardo about the advantages of international division of labor and the modern market economy. Belassa.645 cap. The extremely limited space we have we here we restrict the presentation of literary HOS model and theories arising from it. M. causes the international division of labor. etc. p. etc.M. University of Craiova Printing House. H. most textbooks begin with contemporary literary exposure HOS model and add the final or in an appendix (which can bypass normal reader). worldwide. the authors have used the HOS model most modern means expression achieved in mathematics.Johnson.A. Edgeworth's box to determine the curve of the contracts between market partners. but of these. R.G.Samuelson 1970 edition of his textbook (the 5th. . the '50s. The difference between neoclassical and Ricardo is explaining how each of them relative advantage and novelty of neoclassical theory fixed in proportion to inputs. Promoters HOS model support and sustain further ideas of A. Like their classical predecessors. curve and block opportunities. consequently. without government intervention. Romania (Iasi).Samuelson contributing authors. Because of this. Romania(Craiova) 2001. ability to spontaneously self regulated by the oscillation of prices. J. five are particularly important. a country has relative advantage in the production and export of certain economic goods that you get as consuming at a rate greater abundance factor or factors of production (i) and so cheap (i) and 3 Sources: “Contemporary Economic Doctrines”. W. neoclasicii argue that the relative advantage of each country is the most effective criterion of specialization in production and international trade. rich. Michael Tudosa. and A. Bhagwati states that one can talk about a broad mathematical formalization and graphics HOS model only after the Second World War. industrial.38 897. agricultural. cap. p.658-667 respectively) and one in 1989 (Part 7. and block the production possibilities curve.Corden. that the efficiency of foreign trade and international transactions. regardless of country. namely: a) The main cause of trade between countries. this principle is universally true for countries that have absolute advantage in the production of certain goods (A. So proceed and P.Y.Jones. b) The mechanism of exchanges of goods on the world market. Kemp. small. Marshall. p. Smith) and for countries with absolute disadvantage in producing all. c) The immediate results of the mutual benefits of international trade or partners. as P.A. p. J.905-910 respectively).34. Among these tools are: consumer indifference curves used F. the criterion that specialization in production and foreign trade and. Bhagwati. V. mathematical economists that in previous decades. Understanding sophisticated form (formalized) liberal neoclassical theory assumes. its graphic expression. Meade. Pareto. After their assessment. Junimea Publishing House. poor.). J . including pricing in this market. „Economic Doctrines”.
if possible. showed that international trade leads to equalization of pay factors of production. 6. 1992. 1978. Factors are perfectly mobile and perfectly competitive within national borders. International Editions. all of the factor or factors of production rarely (i) and so expensive (i).consuming less or. are paid according to marginal productivity. Samuelson. International Editions. we assume that Northern countries are relatively capital stock K / L higher in the South. 1992. Impact of cost differentials relative prices of factors influencing the intensity relative factors used in their manufacture. Transport costs are neglected. Thus. goods can be produced using alternative production techniques. Michael Tudosa. 14th edition. labor and capital. Romania(Iasi). countries. In these circumstances.Essence of H-O-S model4 A country has comparative advantage in producing a good when she use intensive the factor characterised by relative abundance in relation to its commercial partner. It assumes that countries have the same technology if they do not use the same production techniques. we say that Northern countries are relatively abundant in capital and that countries Southern labor is relatively abundant factor. by definition. they are identical for each item in different countries. through an extremely complex demonstration. international trade exchange corresponds to an abundant factors against scarce factors (countries will export goods whose production required a significant amount of abundant factors and will import goods produced with factors which. input-output 4 5 Extract: „Economics”. Factors of production can not overcome national borders and are uniform (no distinction is made between work more or less qualified). Production functions are linear and homogeneous for each item. the following conditions: National and international markets are perfect competition. therefore specialization within each country is partial. “Contemporary Economic Doctrines”. and if. North have cheap capital and the southern countries of cheap labor. there is a tendency to equalization of paying factors of production. As a result. Yields are decreasing. 6 . Are taken into account two factors. 14th edition. The theoretical fundaments of international trade5 It assumes that countries do not have the same relative endowment of factors and therefore do not have the same relative costs of production. if they are poor). Because rare factors are expensive and cheap ones are abundant. Junimea Publishing House.If we note the capital K and work with him. Data from: „Economics”. 5.
International Editions. Ohlin gives an example. 1999. per acre should be intensively cultivated. the two sectors are adapting to this report (S / R) carrying out labor ground combinations (L / G) are identical. if the wheat price increases. where due to limited production. 1992. the large differences between countries in the endowment or provide them with inputs. Romania (Braila). In his famous work. as each country has a limited stock of factors. with hard work and more capital to produce the required amount of food. cloth. therefore. they are divided according to product value. the earth. 14th edition. and two factors. Consider two products or sectors. for reasons contrary to those of the North. a) Increasing the salary / rent (S / R) causes an increase in prices of woven-wheat ratio (Pwo / Pwh) and a fall in the wheat-woven fabric (Pwo / Pwh). due to the abundance of equipment and high cost of labor. wheat. a single report of Pwo-Pwh price. the land will not be very profitable. If wheat is cheap. on the other hand. labor intensive techniques. c) In both countries. Ohlin's view. whatever the place of production. Publishing Economic Independence. Thus. and we assume that. Ohlin analysis of the international division of labor issue or geographic location location efficient sound production. B. while producers in the South will choose factor labor intensive techniques. the key to explaining the international division of labor and international trade consists in B. a more expensive product factors. to produce textiles. while in Britain the situation is reversed. combining capital and labor in different ways. This can be expressed either in natural form (the ratio between capital and labor) or in monetary form (the ratio between profit and wages) of industries and countries 6 Sources: „Economics”. 7 . and textiles. b) As international trade equalizes the relative price of products." Because it takes into account the cost of international transport link B.1 Factor abundance and comparative advantage6 Samuelson's proof is placed in the case of two countries and two goods. For example. for example cars and textiles. B. capital-intensive techniques used cars. Conversely." Therefore. rent will be lower in the price of labor and the S / R increases. aiming to avoid unnecessary costs. it is less suited to produce goods that require a higher sentence of factors existing in small quantities in its content or the factors that has not at all. assumed the same ratio L / R in the two countries. land and labor. agricultural products would then be very cheap in Australia but would be relatively expensive items processed. So the ratio Pwo / Pwh is small. Producers in the North will be interested to choose capital-intensive production techniques. will be affected less work. as it requires more land. 6. If both countries would take one all the necessary consumer goods. this distinction is called scarcity (abundance) relative factor intensity of production factors. Pwo / Pwh increases as rent and the S / R is reduced. He writes that "Australia has more land. but less work. as long as the Great Britain has an advantage in producing goods that require a considerable amount of these factors (of production). ”International Trade and Contemporary Trade Policy. Ohlin concludes that "each region is better equipped to produce goods that require a larger proportion of relatively abundant factors there. we can assume that manufacturers can choose between different techniques. Indeed.coefficients being flexible and dependent on the relative price of inputs. and Vol II. less capital and fewer mines than Great Britain. "Interregional Trade and International Trade" (1933). less expensive one. In the literature later. Australia is better adapted for producing goods that require a large amount of agricultural land.
as expressed by input price equalization theory and the income they obtain the owners of these factors. forests are very expensive. international-) allows the processing activity (industrial) to adapt the local geographical enlargement of the factors of production." This indirect influence of international trade on the prices of factors of production. so in direct proportion to demand and vice-versa proportionately with the supply of goods on the market. Ohlin refers again to the equalization process." B. the United States of America. by default. the forests of Scandinavia would be certainly even cheaper. the authors model HOS argue that analysis of the prices of final goods and production factors determine price. the influence of demand from other parts of the world.A.Samuelson consider the possibility of full equalization of prices of inputs (" P. In their view. land) is income (salary. but also the prices of factors of production is the natural consequence of the fact that trade (obviously. "Trade . banker and land owner). Marshall. But if there was no export of such products. and when they become the object of transactions directly on the world market. wood products are exported. B. if wood products could be imported from Canada and Scandinavia. ie the company's manager. writing:" You could say. Unfortunately. tend to equalize incomes in partner countries.compared. A. the model for conducting international trade and pricing is neoclasics opinion. on how long P. both domestic and world markets. Ricardo A. They would also. This means that no matter at what level are exchanged goods (domestic or world markets). Novelty arises when neoclasics examine the consequences of international trade on income distribution operators in partner countries. Neoclasics simplify matters.inequality tends to modify the original (initial) price and determine their training uniform. Ohlin argued that it may have been a "full equalization"among others and because the complex nature of demand (joint demand ").B. and economical (cheap) to another place where they cost more expensive. but unproven in its application. On the other hand.A. International trade increases demand for goods produced by factors abundant (and cheap) and to reduce the demand for scarce factors (and expensive). a place where they are abundand. but would be more expensive. there are differing views even among promoters of this model of thinking: B. indeed. prices are formed by the same mechanism. the deployment mechanism is the same trade.. Addressing mechanism for international trade. due to changes in demand for final goods is enhanced by its direct influence on input prices. so accepting it by abandonment. and bypassing his conclusion. The first allows makers to pass. that mobility of production factors and goods that work the same way on prices. The reasoning that leads to this conclusion assumes neoclassical directly proportional relationship between rarity and price: fewer goods are expensive and more abundant goods are cheap. to a certain extent. expressly rejecting premise raised by Ricardo as being unrealistic. Ohlin's conclusion that "This trend towards equalization of prices not only goods. which over time leads to cheaper priced factors that were initially more expensive factors were cheaper initial outcome of these processes is the tendency to approximate the level of prices of factors of production or review of prices of these inputs. To the extent that the price of production factors (labor. In a paper written after the Second World War (1955 "Foreign Trade Policy). capital. depending on the subjective assessment of consumers and the volume of traded goods. profit. land rent and interest) for their owners (owner equity. namely the idea that "another principle "governing the world trade market (relative advantage) compared to the national market (labor time needed to produce goods). employee. Walras. as happens now. Forests are cheap in northern Scandinavia and as a result. Ohlin wrote in 1933.Samuelson's paradox "). In essence.continues Ohlim . The second allows 8 . is that resulting from general economic equilibrium theory formulated by L. Ricardo did not explain how the transition from one principle to the other to the extent that a manufacturer can sell goods and domestic (national) and external market (the world). etc.” In the degree of equalization of prices through international trade. "It's easy to give examples of this tendency of equalization of prices due to trade . brought a questionable premise ("international immobility of factors of production") and made a conclusion plausible at first sight.
They give as examples the case of small countries in Asia (South Korea. less different. and indirectly. Most countries are in a precarious situation (underdevelopment). and ending with "consumer surplus or rent. in addition to their opening to the outside. to which we refer below. so relative advantage is also a mutual benefit. which lose a lot from unequal exchanges or nonequivalent. more complex and this conclusion has been criticized from many directions. Taiwan.Samuelson.rent. in industrialized countries generally. If a person would report's optimistic conclusion P. in principle. by the fact that different countries become more equal skills. despite the fact that they acknowledge the existence of large differences between countries.Rostow. interrelated processes of trade and despite the cyclicality of these processes." Summarizing the discussions of neoclassical economic literature about the consequences or results of international trade. the production cost of goods produced in these countries is. according to neoclassical liberal. interest on capital and wages . two other advance their economic factors have allowed imports that is advantageous from the highly industrialized Western countries and the massive involvement of the respective states in their industrialization process. free trade policy. In essence. but notwithstanding that.A. P. protectionist measures. namely the economic crisis (decennial cyclical.A. which means lower prices.installation in places convenient production. increase national wealth and national income. mainly due to internal causes ("vicious circle of underdevelopment" is due to population growth at a pace faster than income national capital is insufficient due to lack of savings income or poor). according to neoclasics.Samuelson the harsh reality and dramatic in Romania after 1989. When borders are opened to international trade. There's obviously an equalization of prices of goods: directly on international trade for goods (final)'s subject. from better use of available inputs. global). the HOS model of international trade and the two theories of the (share price 9 . in other words. "opening to the outside" of the economy of these countries that fully liberalized their external trade could "train" spontaneously. Long-term results of international trade are neoclasics vision. rejecting. but about two-thirds of the globe countries. like additional investment capital. J. the cost .A. Hong Kong.. Consequently. And the example is not unique. both tariffs and quantitative quotas (quotas) and qualitative restrictions. good all world countries. secular. on the path of growth and development. Workers in each region can obtain a larger quantity of consumer goods for the same amount of work when people specialize in industries that have comparative advantage and deliver their products in exchange for goods whose production is relatively disadvantage. this takes many concrete forms of mutual benefit. ie the third world or developing countries.). then everyone is better off (it has benefit). industrial potential. would 'spread' of economic growth developed to the underdeveloped countries (P. Nurkse. Neoclassical liberals like that. increase revenue. R. do not know the process of economic growth. regional. etc. Machlup) have sought to highlight the extent to which foreign trade triggers a process of increasing national income.a tendency toward leveling (smoothing). causing a demand for different factors where they exist in large enough quantities. A limited number of highly developed countries have witnessed a continuous process of growth (increase in national income per capita) and a complex development (infrastructure. in fact. level of living of the population) mainly based on capital accumulation and technical progress. " The immediate results of international trade are beneficial to all parties. Foreign economic policy (trade) is optimal. could hardly adhere to that conclusion. therefore. The problem is.W.Samuelson wrote in 1989 that "when you start the trade between the countries and each country focuses its production in industries that have comparative advantage. according to the HOS model promoters. including the Romanian neoliberal economist Michael Manoilescu interwar (1891-1950). Investigations into the foreign trade multiplier (F. the increasing national income of each country and all countries are exchanging. national. Thailand etc. without exception. In both cases. In both cases the tendency towards greater uniformity in pricing.
Lipscy. Theoretical and practical developments7 Optimistic conclusions drawn based on HOS model have not been absolutely confirmed the historical practice of international trade based on the principle of comparative costs of production.industrial products tends to degrade. GATT and WTO period war. Junimea Publishing House. or to support the early industrialization of developing countries. the Ricardian theory of comparative cost. least developed countries will have to provide an increasing quantity of primary products to get the same amount of industrial products. R.A." In the literature. Liscy. to meet domestic needs without appealing to international markets.Nordhans P.Johnson." The second idea holds that "A tariff or quota misguided far to help consumers in that country will decrease.1987) based on empirical studies concluded that long term. Continuing this logic. be related to some non-economic objectives (eg ensuring the integrity of the moment to defend country question). These papers have examined the influence of customs duty revenues.A. regional economic integration that postwar etc. R. P. W. Lancaster.M.Corden. 1972. Also according to the criterion of productivity. Viner (1892-1970) entitled "Studies in the theory of international trade" (1937) and continuing with works by Stolper. however. The first relates to the fact that "When borders are opened to international trade increases national income of each country and all together. Romania (Iasi). as well as international specialization and free trade policies have been criticized by economist logical argument Manoilescu Rumanian Mihail (1891 1950) in his famous work "Theory of international trade protectionism and" appeared in 1929. Bucharest. H. If in the interwar period.factors. Romania (Bucharest).Travis.G.. the use of customs duties as a suboptimal solution (the second rest) especially in the context of customs unions. "The Effect Prebisch. LA Metzler. Manoilescu protectionism developed a new theory based on economic benefits. customs fees extent that encourage or impede trade flows. the Liberals supported the full liberalization of international trade for reasons of economic efficiency. Countries lose from international trade protectionism as a lower efficiency removes its own specialization and division of labor.A. “Contemporary Economic Doctrines”. numerous works have been published examining the optimal level of customs duties from the work of J. Because of this. making imports more expensive and less productive throughout the world. Manoilescu reformulated logic principle of comparative costs of production in terms of proving and arguing that labor productivity to gain advantages in foreign trade. Publishing House. Already in the interwar period. Bhagwatis. the issue of external trade policy was more nuanced and made known some development time. optimizing customs duties. etc. The book "Economics" published in 1989 W. their real income. and equalization and income) were and are still invoked in the literature and documents interwar League of Nations of the UN. J.Samuelson and believes that international trade theory rests on two major findings. Michael Tudosa. 1978. each country must move towards the development of those activities that have higher productivity than the national average. the exchange ratio of primary products . “History of World Trade and Trade Policy”. 10 . This phenomenon. 7. the Argentine economist Raul Prebisch (1901 .P. highlighted that the specialization of countries based on classical and neoclassical theory of international trade does not benefit all participants and is not likely to cause an effect to drive economic growth in developing 7 Sources: “Economy of International Trade”. direct and immediate sustţinînd protectionism need for the development of national industries. 1997. in support of global trade liberalization program. Didactic and Pedagogic Publishing. W. M.Samuelson. then after the war. K. they admit that protectionism is justified within certain limits. Consequently.
Michael Tudosa. which again demonstrates the inadequacy of the liberal model and neoclassical HOS. From the perspective of the consequences that foreign trade has on economic growth and development. without taking into account labor productivity to the goods.313 Import substitutes 3. 8. and that HOS model.A. Publishing Economic Independence.1Leontieff Paradox American economist. amplifies the international economic disparities.. Michael Tudosa.). with capital and labor needs to get replaced by U. 182. W. "Comparing and working capital needs one million dollars to U. This conclusion is reached by Leontieff called in literature as "Leontief paradox". Romania (Iasi). imports of goods worth one million dollars. 7. general economic equilibrium theory. but rather .091. hence the view that trade benefits are equivalent and approximately equal variants of neoclassical theory. HOS model and related theories have dominated the liberal academic literature (neoclasicii) throughout the twentieth century. Junimea Publishing House. 1999. economy would be characterized by a relative surplus of capital and relative lack of labor. faced a double challenge. on the one hand. and Vol II.countries. Sources: “Contemporary Economic Doctrines”. 1978. the United States exports goods whose domestic production absorbs relatively large amounts of capital and less labor and imported foreign goods and services. Initially.S.S. Ricardo's comparative cost theory . the United States is rich in labor and capital poor. "In terms of relative production opportunities in the country and abroad. Leontieff in 1947 reached the following results: Exports Capital (dolars in prices of 1947) Labor (human-year) 2. In reality. international trade 8 Sources: “Contemporary Economic Doctrines”. multiplying the criticism addressed to this principle and theories based on it from heterodox economists. the topic of international economic relations theory issue is articulated with economic underdevelopment and the global economy. and Vol II. ”International Trade and Contemporary Trade Policy.S. which if it had been produced domestically. create employment. it shows that ". Romania (Braila). Junimea Publishing House. Using inter-relations technique. Publishing Economic Independence. 9 11 . Historical Destiny8 Despite the restrictive assumptions on which it was based (if pure and perfect competition. Romania (Braila). aimed to verify the so-called law of endowment with production factors based on the example of the U. would have required a volume indigentă work great.1 Criticism and defects9 Gradually. but the small volume of domestic capital. exports. economy. however.based on the exchange of values between countries. Leontieff. 1999.S.. things are opposite. their promoters have considered that the principle of relative advantage in international trade is one of the few unassailable principles of economics (P. ”International Trade and Contemporary Trade Policy. etc. Romania (Iasi).004 The example disproves the theory of HOS endowment with production factors. the U.780. on the other hand. 1978.339 174. This country used foreign trade to save capital and to dispose of its surplus labor relative.550.developed by classical and neoclassical .Samuelson). 8.
1997. Sută-Selejan S. But . Publishing House. Romania (Braila)." But as these alleged ideal premises do not meet in real life. Conclusions In general. prices and wages levels and when appropriate macroeconomic policies removed serious business cycles and economic upheavals of the stage business. but. Sută N. when economies have prospered if they lower trade barriers to foster economic integration in world industrial nations.Hordhans P.S. since it involves an economic framework that works smoothly. 1972. 10. the ideas of these experts are considered for translating into practice the liberal economic system. 2. 12 . Publishing Economic Independence. However. the authors acknowledge that the audience referred to this theory significantly lower during periods of downward economic cycles.issues in the design or HOS theorem could not satisfactorily explained. persons and capital within the European Union. “Economy of International Trade”. his supporters were forced to admit that it has certain limitations. 11. 1999.in its classical premises. Romania (Bucharest). 1992 and 1994. because he offers advantages even that in reality.A. "The comparative advantage of the prestige gained in the 1950s and 1960s. heavily indebted countries when the economy was paralyzed by a high exchange rate of the dollar and protectionism. trade deficits and stagnant industry”. and Vol II. but its practical utility has proven to be false." 9. if is the case.the theory was again overshadowed in the 1980s. "Its main defect (relative advantage theory) consists of . the HOS model was and is greatly appreciated and criticized. his ideas Ohlin. Romania (Bucharest).still the two authors . Sută N (Coord). Publishing House. at least in the period of analysis. The two authors conclude that "These phases of history (modern market economy) is relevant evidence that the classical theory of relative advantage justifies its social relevance only when the exchange rates.A. economical relations in the world. “History of World Trade and Trade Policy”. anyway. that is of great importance in the history of economic thought and contributes much to the further progress of science and eventually of the practice in international and regional. References: 1.and W. Samuelson and Heckscher were taken. and and no involuntary unemployment. Sută N.Samuelson wrote in 1989 . with prices and wages that adapts quickly. Bucharest. the model has great value in developing economic thought. Personal Opinion According to my opinion. 3.. In the current period. 4. he also offers and disadvantages. Didactic and Pedagogic Publishing. and the economy growing U. we believe that an argument would be even creating facilities for movement of goods.”International Trade and Contemporary Trade Policy.Sută-Selejan S. “Current Doctrines and Modern and Contemporary Economic Thinking”. analyzed and criticized by other economists in the world economic growth.
6. 7. 8.
Sută N.C. (coord), Drăgan G., Mureşan M., Sută-Selejn S.“Contemporary Economic Doctrines”, Michael Tudosa, Junimea Publishing House, Romania (Iasi), 1978. Sultana Sută-Selejan. „Economic Doctrines”, Efficient House, Romania(Bucharest), 1996. Ivanciu Nicolae-Văleanu. „Economic Doctrines”, University of Craiova Printing House,Romania(Craiova) 2001. Paul A. Samuelson, W.D.Nordhaus. „Economics”, 14th edition, International Editions, 1992.
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