Resource-Allocation Advantage and International Trade

This article demonstrates that wealthy and advanced nations have the capacity to absorb additional resources to the nontradable sectors. This absorption capacity provides them with an advantage in resource allocation, which consequently transforms to welfare gains in trade. The author builds a mathe...

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Bibliographic Details
Published in:American review of political economy 2012-06, Vol.10 (1/2), p.18
Main Author: Yu, Peng
Format: Article
Language:English
Subjects:
Absorptive capacity
American Recovery & Reinvestment Act 2009-US
Bakeries
Economic policy
Employment
Equilibrium
GDP
Government spending
Gross Domestic Product
Higher education
Hypotheses
International trade
Leisure
Mathematical models
Productivity
R&D
Recessions
Research & development
Resource allocation
Studies
Terms of trade
Trade policy
Wealth
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Summary:This article demonstrates that wealthy and advanced nations have the capacity to absorb additional resources to the nontradable sectors. This absorption capacity provides them with an advantage in resource allocation, which consequently transforms to welfare gains in trade. The author builds a mathematical model that captures this institution of resource-allocation advantage and that provides a measure of its welfare effect on trade. The model also compares the relative strength of such advantage between wealthy nations. It draws three main conclusions: (1) the resource-allocation advantage makes wealthy nations better off; (2) immiserizing growth is less likely to occur to wealthy nation; and (3) some key economic parameters such as productivity and national wealth level can affect trade gains. [PUBLICATION ABSTRACT]
ISSN:1551-1383
1551-1383