Chap 2-New Modern Trade Theories

International Trade Theories
International Economics I ((Econ 3081))

(BA Degree in Economics)
Chapter 2- New modern trade theory
Mengesha Yayo(Ph.D. in Economics)
AAU, Department of Economics
December , 2021
Mengesha.Y(Ph.D.) International Economics I ((Econ 3081)) (BA D

The New/Modern Trade Theories
These empirical challenges to the predicted trade patterns of traditional models

of international trade are the main focus of new/modern trade theories.
The new /modern trade theory reviews several of the more recent theories on
the causes and consequences of trade.
These newer approaches depart from traditional trade theory by relaxing
several assumptions employed in the basic trade model.
It is important to recognize that the causes of trade in the new modern
trade theory are more complex than those portrayed in the basic
Heckscher-Ohlin model.

The new/modern trade theories built by relaxing/exdending/ some of the

assumptions of basic trade model
Some of the implications of this relaxation incorporate
Differences in technology across countries,
An active role for demand conditions,
Economies of scale,
Imperfect competition, and
A time dimension to comparative advantage.
Intra-industry trade

The Imitation Lag Hypothesis

The imitation lag hypothesis in international trade theory was formally
introduced in 1961 by Michael V. Posner.
This theory is discussed here only to the extent that it paves the
way for a better-known theory—the product cycle theory.
The imitation lag theory relaxes the assumption in the
Heckscher-Ohlin analysis that the same technology is available
everywhere.
It assumes that the same technology is not always available in all
countries and
There is a delay in the transmission or diffusion of technology from
one country to another.

Consider countries I and II. Suppose that a new product appears in country I
due to the successful efforts of research and development teams.
According to the imitation lag theory, this new product will not be produced
immediately by firms in country II.
Incorporating a time dimension, the imitation lag is defined as the length of
time (e.g., 15 months) that elapses between the product’s introduction in
country I and the appearance of the version produced by firms in country II
The imitation lag includes a learning period during which the firms in country II
must acquire technology and know-how in order to produce the product
In addition, it takes time to purchase inputs, install equipment, process the
inputs, bring the finished product to market, and so on
In this approach, a second adjustment lag is the demand lag, which is the length
of time between the product’s appearance in country I and its acceptance by
consumers in country II as a good substitute for the products they are currently
consuming.

This lag may arise from loyalty to the existing consumption bundle, inertia, and
delays in information flows.
This demand lag also can be expressed in a number of months, say, four months.
A key feature in the Posner theory is the comparison of the length of the
imitation lag with the length of the demand lag.
For example, if the imitation lag is 15 months, the net lag is 11 months, that is,
15 months less 4 months (demand lag).
During this 11-month period, country I will export the product to country II.

Before this period, country II had no real demand for the product; after this
period, firms in country II are also producing and supplying the product so the
demand for country I’s product diminishes.
Thus, the central point of importance in the imitation lag hypothesis is that
trade focuses on new manufactured products.
How can a country become a continually successful exporter? By continually
innovating!
This theory has considerable relevance for present-day concerns about the
global competitiveness of U.S. firms.
Further, it seems to be more capable of handling “dynamic” comparative
advantage than are the Heckscher-Ohlin and Ricardo models

The Product Cycle Theory
This theory was developed in 1966 by Raymond Vernon.

The product cycle theory (PCT) of trade builds on the imitation lag hypothesis
in its treatment of delay in the diffusion of technology.
However, the PCT also relaxes several other assumptions of traditional trade
theory and is more complete in its treatment of trade patterns.
The PCT is concerned with the life cycle of a typical “new product” and its
impact on international trade.
Vernon developed the theory in response to the failure of the United States—the
main country to do so—to conform empirically to the Heckscher-Ohlin model.

The Product Cycle Theory-New Product stage
Vernon emphasizes manufactured goods, and the theory begins with the
development of a new product in the United States.
The new product will have two principal characteristics:
(1) it will cater to high-income demands because the United States is a
high-income country; and
(2) it promises, in its production process, to be labor-saving and
capital-using in nature. (It is also possible that the product itself—e.g., a
consumer durable such as a microwave oven—will be labor saving for the
consumer.)

The Product Cycle Theory-New Product stage
The reason for including the potential labor-saving nature of the production
process is that the United States is widely regarded as a labor-scarce country.
Thus, technological change will emphasize production processes with the
potential to conserve this scarce factor of production.
The PCT divides the life cycle of this new product into three stages.

The Product Cycle Theory-First stage -New Product Satge
The product is produced and consumed only in the United States.

Firms produce in the United States because that is where demand is located,
and these firms wish to stay close to the market to detect consumer response to
the product.
The characteristics of the product and the production process are in a state of
change during this stage as firms seek to familiarize themselves with the product
and the market.
No international trade takes place.

The Product Cycle Theory-Maturity -product stage

The Product Cycle- Second Satge - Theory-Maturity -product stage
In this stage, some general standards for the product and its characteristics
begin to emerge, and mass production techniques start to be adopted.
With more standardization in the production process, economies of scale start to
be realized.
This feature contrasts with Heckscher-Ohlin and Ricardo, whose theories
assumed constant returns to scale.
In addition, foreign demand for the product grows, but it is associated
particularly with other developed countries, because the product is catering to
high-income demands.
This rise in foreign demand (assisted by economies of scale) leads to a trade
pattern whereby the United States exports the product to other high-income
countries.

Other developments also occur in the maturing-product stage. Once U.S. firms
are selling to other high-income countries, they may begin to assess the
possibilities of producing abroad in addition to producing in the United States.
If the cost picture is favorable (meaning that production abroad costs less than
production at home plus transportation costs),then U.S. firms will tend to invest
in production facilities in the other developed countries. If this is done, export
displacement of U.S.-produced output occurs.
With a plant in France, for example, not only France but other European
countries can be supplied from the French facility rather than from the U.S.
plant. Thus, an initial export surge by the United States is followed by a fall in
U.S. exports and a likely fall in U.S. production of the good.
This relocation-of-production aspect of the PCT is a useful step because it
recognizes—in contrast to H-O and Ricardo—that capital and management are
not immobile internationally.

This feature also is consistent with the very large amount of direct investment
by U.S. firms in western Europe during the 1960s and 1970s and, in a more
recent context, by Japanese firms in rapidly growing countries in Asia (such as
China, South Korea, and Taiwan).
Vernon also suggested that, in this maturing-product stage, the product might
now begin to flow from western Europe to the United States because, with
capital more mobile internationally than labor, the price of capital across
countries was unlikely to diverge as much as the price of labor.
With relative commodity prices thus heavily influenced by labor costs, and with
labor costs lower in Europe than in the United States, Europe might be able to
undersell the United States in this product. (Remember that Vernon was writing
in 1966; it is less true today that Europe’s labor costs are lower than those of
the United States.)
Relative factor endowments and factor prices, which played such a large role in
Heckscher-Ohlin, have not been completely ignored in the PCT.

The Product Cycle Theory-standardized-product stage
The final stage is the standardized-product stage.

By this time in the product’s life cycle, the characteristics of the product itself
and of the production process are well known; the product is familiar to
consumers and the production process to producers.
Vernon hypothesized that production may shift to the developing countries.
Labor costs again play an important role, and the developed countries are busy
introducing other products.
Thus, the trade pattern is that the United States and other developed countries
may import the product from the developing countries.

Figure 1 summarizes the production, consumption, and trade pattern for the
originating country, the United States. In summary, the PCT postulates a
dynamic comparative advantage because the country source of exports shifts
throughout the life cycle of the product..
Early on, the innovating country exports the good but then it is displaced by
other developed countries— which in turn are ultimately displaced by the
developing countries.
A casual glance at product history yields this kind of pattern in a general way.
For example, electronic products such as television receivers were for many years
a prominent export of the United States, but Europe and especially Japan
emerged as competitors, causing the U.S. share of the market to diminish
dramatically.
More recently, Japan has been threatened by South Korea and other Asian
producers.
The textile and apparel industry is another example where developing countries
(especially China, Taiwan, Malaysia, and Singapore) have become major
suppliers on the world market, displacing in particular the United States and
Japan.
AutomobileMengesha.Y(Ph.D.)
production and export location also shifted Economics
International relatively from
I (the
(Econ 3081)) (BA D
This dynamic comparative advantage, together with factor mobility and

economies of scale, makes the product cycle theory an appealing alternative to
the Heckscher-Ohlin model.
There is no single all-encompassing test (such as the Leontief test of
Heckscher-Ohlin) to verify empirically the product cycle theory.
Instead, researchers have examined particular features of the PCT to see if they
are consistent with real-world experience.

For examplenew product development is critical to the PCT, and it is often the
result of research and development (R&D) expenditures.
Therefore, economists hypothesize that, in the U.S. manufacturing sector, there
should be a positive correlation between R&D expenditures and successful
export performance by industry.
A number of early tests indicated this result, including those by Donald Keesing
(1967) and William Gruber, Dileep Mehta, and Vernon (1967).
Kravis and Lipsey (1992) found that high R&D intensity was positively
associated with large shares of exports by U.S. multinational companies (MNCs).

Furthermore, over the past 25 years, greater shares of exports from U.S. MNCs
have come from overseas production, which is consistent with the
direct-investment and export-displacement features of the PCT.
In addition, in 1969, Louis Wells examined the income elasticity of demand of
the fastest-growing U.S. exports and found that trade in “high-income”-type
products indeed grew more rapidly than other products—again, an occurrence
consistent with the PCT.

Among the many other empirical works is Gary Hufbauer’s (1966) study of trade
in synthetic materials.
Hufbauer found that the United States and other developed countries tended to
export new products while developing countries tended to export older product
Gruber, Mehta, and Vernon (1967) also discovered that research-intensive U.S.
industries had a high propensity to invest abroad.
This is consistent with the maturing-product stage of the theory.
In 1972, John Morrall found that U.S. industries that were successful exporters
also tended to have relatively high expenditures on nonpayroll costs such as
advertising, sales promotion, and so forth.
This finding is consistent with the product cycle theory because production of
new products involves such spending.

Many other studies of PCT features have shown consistency between real-world
experience and aspects of the theory.
Raymond Vernon (1979) later suggested that the PCT might need to be
modified.
The main alteration concerns the location of the production of the good when
the good is first introduced.
Multinational firms today have subsidiaries and branches worldwide, and
knowledge of production conditions outside the United States is more complete
than it was at the time of Vernon’s original writing in 1966.

Thus, the new product may be produced first not in the United States but
outside the country. In addition, per capita income differences between the
United States and other developed countries are not as great now as in 1966, so
catering to high-income demands no longer implies catering to U.S. demands
alone.
Even with this modification, the salient features of scale economies, direct
investment overseas, and dynamic comparative advantage still distinguish the
product cycle theory from the Heckscher-Ohlin model.
One hesitates, however, to distinguish the product cycle theory so clearly from
the Heckscher-Ohlin model.
Elias Dinopoulos, James Oehmke, and Paul Segerstrom (1993) constructed a
theoretical model that has PCT-type trade emerging as a result of differing
factor endowments across countries.
The model utilizes three production sectors in each country: an innovating
high-technology sector, an “outside-goods” sector that engages in no product
innovation, and a sector that supplies R&D services to the high-technology
sector.

Like H-O, there are only two factors (capital and labor), identical production
functions across countries, and constant returns to scale.
Assuming that the R&D sector is the most capital-intensive sector, a
capital-abundant country produces a great deal of R&D.
This enables a firm in the high-technology sector in that country to obtain a
temporary monopoly in a new product—with patent protection— and then to
export the product.
After the patent expires, production occurs abroad with some export from that
location.

While a complete explanation is beyond the scope of this book, Dinopoulos,

Oehmke, and Segerstrom’s model generates PCT-type trade as well as
intra-industry trade (a concept discussed later) and a role for MNCs.
Thus, Heckscher-Ohlin and the product cycle theory may well be
complementary, not competing, theories.
In similar fashion, James Markusen, James Melvin,William Kaempfer, and Keith
Maskus (1995, p. 209) introduced the idea of a life cycle for new technologies
containing elements of both the Dinopoulos, Oehmke, and Segerstrom model
and the product cycle model.
Noting the growing importance of technology in the trade of industrialized
countries, Markusen et al. suggest that, just as there is a product cycle for
consumer goods, there increasingly appears to be a cycle for techniques of
production and machinery, as techniques and machines developed in
industrialized countries eventually find their way into labor-abundant developing
countries.

This technology cycle is driven by the capital-abundant, high-wage countries

where there is both a cost incentive and a sufficient market demand to warrant
new labor-saving technology and new-product development.
The capital-abundant countries thus produce a flow of new products and
innovations, with firms often protected by a temporary monopoly via patents to
produce for the home market.
Because the new labor-saving technologies are not consistent with the relative
factor abundances in the labor-abundant developing countries, those countries
initially have little economic incentive to acquire the innovations.
Consequently, capital-abundant countries export the new products utilizing the
new technology.
Eventually, however, as incomes start to rise in developing countries and even
newer technologies are produced in the developed countries, the machines
embodying theoriginal “new” technology are exported by capital-abundant
countries and the final products start being produced in the labor-abundant
countries.
Later, as in the product cycle theory, the machines themselves may be produced
in the developing countries and exported from them.

The Product Cycle Theory- Figure 1
From time t0 until time t1, the United States is producing the new product only
for the home market and thus there is no trade.
From time t1 until time t2, the United States exports the good to other
developed countries (exports production minus consumption) and may even
begin importing the good from those countries (imports consumption minus
production).
From time t2 onward, imports arrive into the United States from other
developed countries and, increasingly, from developing countries.

Linder Theory
This theory explaining the composition and pattern of a country’s trade was
proposed by the Swedish economist Staffan Burenstam Linder in 1961.
The Linder theory is a dramatic departure from the Heckscher-Ohlin model
because it is almost exclusively demand oriented.
The H-O approach was primarily supply oriented because it focused on factor
endowments and factor intensities.
The Linder theory postulates that tastes of consumers are conditioned strongly
by their income levels; the per capita income level of a country will yield a
particular pattern of tastes.
Linder is concerned only with manufactured goods; he regards
Heckscher-Ohlin as fully capable of explaining trade in primary products.
These tastes of “representative consumers” in the country will in turn
yield demands for products, and these demands will generate a production
response by firms in that country. Hence, the kinds of goods produced in
a country reflect the per capita income level of that country.

Linder Theory
To illustrate the theory, suppose that country I has a per capita income level
that yields demands for goods A, B, C, D, and E.
These goods are arrayed in ascending order of product “quality” or
sophistication, with goods A and B, for example, being low-quality
clothing or sandals while goods C, D, and E are farther up the quality
scale.

Linder Theory
The Linder conclusion is consistent with aspects of the product cycle theory and
fits with the observation that the most rapid growth in international trade in
manufactured goods in the post–World War II period has been between
developed countries.
The Linder theory has been subjected to a number of empirical tests.
A common type of test is formulated as follows: Suppose that we have
figures on the absolute value of the per capita income differences between
a given country I and its trading partners.
Then we get information on the intensity of trade between country I and
each of its trading partners.
The Linder theory would hypothesize that the relationship between these
two series is negative because the greater the difference between the per
capita incomes of country I and a trading partner, the less intensely the
two countries will trade with each other.

Linder Theory
The gravity models focus on the interaction between the resistance (geographic
distance) and attraction (similar demand patterns).
The expectation is that controlling for geographic factors, countries with
similar demand patterns will trade more intensively with each other.
Two early tests using gravity models found little or no evidence to support the
Linder theory (Hoftyzer, 1984; Kennedy and McHugh, 1983).
However, using a gravity model to control for distance between countries and
other determinants of trade, Jerry and Marie Thursby (1987, p. 493) found that
support for Linder’s hypothesis was overwhelming in their study of the
manufactured goods trade of 13 European developed countries, Canada, Japan,
the United States, and South Africa.

Linder Theory
Linder’s theory can incorporate this notion of product differentiation, because

country II might be exporting Hyundais to country III and country III might be
exporting Ford Fusions to country II.
Another probable cause of this two-way flow of a product is that producers in
any one country are producing for the mass market of consumers in their
country.
Consumers with specialty tastes or at income levels well above or below the per
capita income level of the country may find their wants unsatisfied by home
producers and will import their desired varieties of the good.
Thus, low-income consumers in higher-income country II may purchase the good
from country I, which has a lower per capita income, and high-income
consumers in country I may purchase the good from country II.
Countries that export and import items in the same product classification are
engaging in intra-industry trade (IIT).

Overlapping of Demand in Linder Model

Economies of Scale
Some alternative trade theories are based on the existence of economies of scale.
In several of these models, the economies of scale are external economies
pertaining to the industry rather than the firm.
In such industries, as output increases firms experience cost reductions per unit
of output because, for example, the industry growth is attracting a pool of
qualified labor.
In a two-country world where the countries have identical PPFs and demand
conditions, there is normally no incentive to trade.
If the two industries experience economies of scale, the model generates a
potentially new reason for trade.
In spite of the fact that both countries begin with identical autarky positions, a
shock that results in each country moving to specialization in different goods
and trading would lead both countries to experience gains from trade.

Economies of Scale
While the gains from trade are clearly a result of the cost reductions that come
from specialization that exploit the economies of scale, there are a number of
uncertainties in this model.
First, there is no way to know which country will specialize in each good.
Second, something unusual is needed to jolt production away from the autarky
point, but there is no way to predict the cause of the shock.
In spite of these uncertainties, the analysis opens up new possibilities for gains
that do not exist in traditional models.
Whether the introduction of increasing returns is more realistic than the
constant-returns assumption is a debated question, but increasingly, economists
do think that scale economies can be important.

Krugman Model
This theory of trade represents a family of newer trade models that has emerged
since Heckscher-Ohlin. While Paul Krugman has developed other models, we
refer to this widely cited model (November 1979) as the Krugman model.
This model rests on two features that are sharply distinct from those of
traditional models: economies of scale and monopolistic competition.
In the Krugman model, labor is assumed to be the only factor of
production.

Krugman Model
First characteristics of krugman model : The scale economies (which are internal to
the firm) are incorporated in the equation for determining the amount of labor
required to produce given levels of output by a firm,
All firms in the economy are assumed to have this type of labor requirement
equation: L = a + bQ
It means that a doubling of output requires less than a doubling of input;
that is, economies of scale in production exist.
It should be evident that this equation is not applicable to a Ricardian model,
because constant costs of production would make the relevant labor-usage
equationL = bQ; that is, the labor input has a constant relation to the amount
of output.

Krugman Model
The second main characteristic of the Krugman model is the existence of the market
structure of monopolistic competition.In monopolistic competition,
There are many firms in the industry and easy entry and exit.
In addition, there is zero profit for each firm in the long run. However, unlike
the perfect competition of traditional trade theory, the output of firms in the
industry is not a homogeneous product.
The products differ from each other, and each firm’s product possesses a
certain amount of consumer brand loyalty.
Product differentiation leads to advertising and sales promotion as firms
attempt to differentiate their products in the minds of consumers.

Krugman Model
On the horizontal axis, we place consumption of a typical good by any

representative consumer in the economy, that is, per capita consumption, c.
The vertical axis indicates the ratio of the price of the good to the wage rate,
P/ W. The basic notions of the model are illustrated in this figure and through
explanation of the PP and ZZ curves.
The upward-sloping PP curve reflects the relationship of the price of the good
to marginal cost.
As consumption increases, demand becomes less elastic.
This is like the ordinary straight-line demand curve studied in the introductory
economics course—at lower prices and larger quantities, demand is less elastic
than at higher prices and smaller quantities
As movement from E to E occurs, P/ W falls from (P/W)1 to (P/W)2 and per
capita consumption of this firm’s good falls from c1 to c2.

Krugman Model

Krugman Model
The upward-sloping PP curve indicates that as per capita consumption (c) of

the good rises, the price of the good will rise.
The reason is that demand is assumed to become less elastic as consumption
increases, and thus the profit-maximizing price P MC[eD/(eD 1)] increases.
The downward-sloping ZZ curve reflects the fact that profit in the long run is
zero.
A greater amount of consumption brings the realization of scale
economies, which in turn leads to price reductions and eventually to zero
economic profit. Equilibrium occurs at the intersection point E.
With the introduction of international trade, the size of the market facing the
firm is increased; this is represented by a shift of the ZZ curve to the left or
downward to Z Z .
The consequence is that per capita consumption of the good falls but total
consumption of each good increases.
In addition, the fall in P/ W means that the real wage (W/P) has increased.

Intra -Industry Trade
A characteristic of a country’s trade that has appeared in many new theories

and is increasingly recognized as important in the real world is intra-industry
trade (IIT).
IIT occurs when a country is both exporting and importing items in the
same product classification category.
This trade differs from inter-industry trade, where a country’s exports and
imports are in different product classification categories.
Traditional trade theory dealt only with inter-industry trade, but
intra-industry trade clearly constitutes an important segment of
international trade.

Intra-Industry Trade

Intra-Industry Trade
Table 1 indicates magnitudes and trends in the intra-industry trade in

manufactured goods of selected countries.
IIT is more important in manufactured goods than in nonmanufactured goods
Countries are classified as having a “high” or “low” level of intra-industry trade
according to whether intra-industry trade
Is above or below 50 percent of total manufacturing trade on average over
all periods shown and
Intra-Industry is “Increasing” or “stable” according to whether intra-industry
trade increased by
More than 5 percentage points over a specified time period (Source:
OECD Economic Outlook 71 (June 2002), p. 161.)

Reasons for Intra-Industry Trade in a Product Category
Unfortunately, comparative advantage based on factor endowments is of little or

no help in predicting intra-industry trade.
In fact, intra-industry trade will be relatively greater (compared with
inter-industry trade) the more similar are the capital and labor
endowments of the countries being examined.
In view of this deficiency of the Heckscher-Ohlin model, we now look at
several possible explanations for the occurrence of intra-industry trade.
(For an extensive seminal discussion of reasons for intra-industry trade,
see Herbert Grubel and P. J. Lloyd, 1975.)

Intra-industry trade

Melitz Hypothesis : Heterogeneous Firms, Selection and Intra-Industry Reallocation
1 In the "classical" trade theory (Ricardo and HO), firms play no role: the focus
of these models is on industries, and all firms within a sector are assumed to be
identical
2 Firms enter the picture in the "new" trade theory.
For instance, in Krugman’s model, each firm produces a different variety
of the good.
Nevertheless, all firms are treated as symmetric, namely, they are assumed
to face the same demand function and to share the same technology.
Hence, this model implies that in free trade all firms export

Recent empirical research based on firm-level data sets for many countries has
unveiled a number of new facts that are inconsistent with the symmetric
treatment of firms in these models, and thus call for a new theory that puts
heterogeneous firms at center stage of the analysis:
First, Within any industry, only a small share of firms export.
These firrms are not a random sample of the population. Rather, they are
larger and more productive than non-exporters.
Moreover, exporting firms are more productive already before they start
exporting (self-selection of more productive firms into exporting)

Second,
Trade liberalization induces within-industry reallocations of market shares
in favor of more productive firms
In particular, when trade barriers are lowered, high-productivity firms
survive and grow, whereas low-productivity firms shrink and some of them
are forced to exit the market.
This within-industry reallocation raises aggregate productivity

The New/Modern Trade Theories:The Points of Departure from the Traditional Trade Theories
Reading Assignment

The Relevance of International Trade Theories for Developing Countries
Reading Assignment

Appendix
References
Appleyard, Dennis R. and Field, Alfred J. (1998), International
Economics, Irwin McGraw - Hill, Boston, U.S.A.
Krugman, Paul and Maurice Obstfeld (1997), International

Economics: Theory and Policy, Addison – Wesley Longman,
Inc. California, U. S. A.
Salvatore, Dominic (1995), International Economics, Prentice

hall International, Inc.
Sodersten, B. and G. Reed (1994), International Economics,

New York: St. Martin’s Press, U.S.A.
Alemayehu G. (2012), Fundamental of International

Economics for Developing Countries: A Focus on Africa:
Volume I, Trade Theory, Policy and Practice (Nairobi: AERC
and Moran Publishers).

Chap 2-New Modern Trade Theories

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International Trade Theories

International Economics I ((Econ 3081))

Chapter 2- New modern trade theory

Mengesha Yayo(Ph.D. in Economics)

AAU, Department of Economics

Mengesha.Y(Ph.D.) International Economics I ((Econ 3081)) (BA D

The New/Modern Trade Theories

These empirical challenges to the predicted trade patterns of traditional models

Mengesha.Y(Ph.D.) International Economics I ((Econ 3081)) (BA D

The New/Modern Trade Theories

The new/modern trade theories built by relaxing/exdending/ some of the

Mengesha.Y(Ph.D.) International Economics I ((Econ 3081)) (BA D

The New/Modern Trade Theories

The Imitation Lag Hypothesis

Mengesha.Y(Ph.D.) International Economics I ((Econ 3081)) (BA D

The New/Modern Trade Theories

The Imitation Lag Hypothesis

Mengesha.Y(Ph.D.) International Economics I ((Econ 3081)) (BA D

The New/Modern Trade Theories

The Imitation Lag Hypothesis

Mengesha.Y(Ph.D.) International Economics I ((Econ 3081)) (BA D

The New/Modern Trade Theories

The Imitation Lag Hypothesis

Mengesha.Y(Ph.D.) International Economics I ((Econ 3081)) (BA D

The New/Modern Trade Theories

The Product Cycle Theory

This theory was developed in 1966 by Raymond Vernon.

Mengesha.Y(Ph.D.) International Economics I ((Econ 3081)) (BA D

The New/Modern Trade Theories

The Product Cycle Theory-New Product stage

Mengesha.Y(Ph.D.) International Economics I ((Econ 3081)) (BA D

The New/Modern Trade Theories

The Product Cycle Theory-New Product stage

Mengesha.Y(Ph.D.) International Economics I ((Econ 3081)) (BA D

The New/Modern Trade Theories

The Product Cycle Theory-First stage -New Product Satge

The product is produced and consumed only in the United States.

Mengesha.Y(Ph.D.) International Economics I ((Econ 3081)) (BA D

The New/Modern Trade Theories

The Product Cycle Theory-Maturity -product stage

Mengesha.Y(Ph.D.) International Economics I ((Econ 3081)) (BA D

The New/Modern Trade Theories

The Product Cycle- Second Satge - Theory-Maturity -product stage

Mengesha.Y(Ph.D.) International Economics I ((Econ 3081)) (BA D

The New/Modern Trade Theories

The Product Cycle Theory-Maturity -product stage

Mengesha.Y(Ph.D.) International Economics I ((Econ 3081)) (BA D

The New/Modern Trade Theories

The Product Cycle Theory-Maturity -product stage

Mengesha.Y(Ph.D.) International Economics I ((Econ 3081)) (BA D

The New/Modern Trade Theories

The Product Cycle Theory-standardized-product stage

The final stage is the standardized-product stage.

Mengesha.Y(Ph.D.) International Economics I ((Econ 3081)) (BA D

The New/Modern Trade Theories

The Product Cycle Theory

The New/Modern Trade Theories

The Product Cycle Theory

This dynamic comparative advantage, together with factor mobility and

Mengesha.Y(Ph.D.) International Economics I ((Econ 3081)) (BA D

The New/Modern Trade Theories

The Product Cycle Theory

Mengesha.Y(Ph.D.) International Economics I ((Econ 3081)) (BA D