International Economics: Theory and Policy PDF
Preview International Economics: Theory and Policy
eG GlobAl dITlo GlobAl IobA nl edITIon edITIon I n t e r I nternational Trade n For these Global editions, the editorial team at Pearson has a t i o collaborated with educators across the world to address a wide n a range of subjects and requirements, equipping students with the best l T T heory and Policy r possible learning tools. This Global edition preserves the cutting-edge a d approach and pedagogy of the original, but also features alterations, e TenTh edITIon : customization and adaptation from the north American version. T h e o r y a n d P o lic y T e n T h e d IT Io n K r u g m a n • o b s tfe ld • M e This is a special edition of an established title widely litz used by colleges and universities throughout the world. Pearson published this exclusive edition for the benefit of students outside the United States and Canada. If you purchased this book within the United States or Canada you should be aware that it has been imported without Paul R. Krugman • Maurice Obstfeld • Marc J. Melitz the approval of the Publisher or Author. 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A01_KRUG0439_10_GE_FM.indd 4 20/03/14 9:18 PM International Trade Theory and Policy TenTh ediTion GloBal ediTion Paul R. Krugman Princeton University Maurice Obstfeld University of California, Berkeley Marc J. Melitz Harvard University Boston Columbus Indianapolis New York San Francisco Upper Saddle River Amsterdam Cape Town Dubai London Madrid Milan Munich Paris Montréal Toronto Delhi Mexico City São Paulo Sydney Hong Kong Seoul Singapore Taipei Tokyo A01_KRUG0439_10_GE_FM.indd 5 20/03/14 9:18 PM For robin—P.K. For my family—m.o. For clair, Benjamin, and max—m.m. Editor in Chief: Donna Battista Interior Design: Integra-Chicago Managing Editor: Jeff Holcomb Image Manager: Rachel Youdelman Head of Learning Asset Acquisition, Global Editions: Photo Research: Aptara, Inc. 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Printed and bound by Courier Kendallville in The United States of America A01_KRUG0439_10_GE_FM.indd 6 20/03/14 9:18 PM ■ 7 Brief Contents Contents 9 Preface 15 1 Introduction 25 Part 1 International trade theory 34 2 World Trade: An Overview 34 3 Labor Productivity and Comparative Advantage: The Ricardian Model 48 4 Specific Factors and Income Distribution 75 5 Resources and Trade: The Heckscher-Ohlin Model 108 6 The Standard Trade Model 142 7 External Economies of Scale and the International Location of Production 169 8 Firms in the Global Economy: Export Decisions, Outsourcing, and Multinational Enterprises 188 Part 2 International trade Policy 230 9 The Instruments of Trade Policy 230 10 The Political Economy of Trade Policy 260 11 Trade Policy in Developing Countries 299 12 Controversies in Trade Policy 314 Mathematical Postscripts 337 Postscript to Chapter 5: The Factor-Proportions Model ......................................................337 Postscript to Chapter 6: The Trading World Economy .........................................................341 Postscript to Chapter 8: The Monopolistic Competition Model ...........................................349 Index 351 Credits 360 7 A01_KRUG0439_10_GE_FM.indd 7 20/03/14 9:18 PM This page is intentionally left blank. A01_KRUG0439_10_GE_FM.indd 8 20/03/14 9:18 PM Contents Preface ...............................................................................................................................15 1 Introduction 25 What Is International Economics About? .............................................................................27 The Gains from Trade ...........................................................................................................28 The Pattern of Trade .............................................................................................................29 How Much Trade? .................................................................................................................29 Balance of Payments ..............................................................................................................30 Exchange Rate Determination ...............................................................................................30 International Policy Coordination .........................................................................................31 The International Capital Market ..........................................................................................32 International Economics: Trade and Money .........................................................................32 Part 1 International trade theory 34 2 World Trade: An Overview 34 Who Trades with Whom? .....................................................................................................34 Size Matters: The Gravity Model ...........................................................................................35 Using the Gravity Model: Looking for Anomalies .................................................................37 Impediments to Trade: Distance, Barriers, and Borders .........................................................38 The Changing Pattern of World Trade .................................................................................40 Has the World Gotten Smaller? ..............................................................................................40 What Do We Trade? ...............................................................................................................42 Service Offshoring ..................................................................................................................43 Do Old Rules Still Apply? ....................................................................................................45 Summary .............................................................................................................................46 3 Labor Productivity and Comparative Advantage: The Ricardian Model 48 The Concept of Comparative Advantage ..............................................................................49 A One-Factor Economy .......................................................................................................50 Relative Prices and Supply .....................................................................................................52 Trade in a One-Factor World ...............................................................................................53 Determining the Relative Price after Trade ............................................................................54 box: Comparative Advantage in Practice: The Case of Babe Ruth ........................................57 The Gains from Trade ............................................................................................................58 A Note on Relative Wages ......................................................................................................59 box: The Losses from Nontrade ...........................................................................................60 Misconceptions about Comparative Advantage .....................................................................61 Productivity and Competitiveness ..........................................................................................61 box: Do Wages Reflect Productivity? ...................................................................................62 The Pauper Labor Argument .................................................................................................62 Exploitation ...........................................................................................................................63 Comparative Advantage with Many Goods ...........................................................................64 Setting Up the Model ............................................................................................................64 9 A01_KRUG0439_10_GE_FM.indd 9 20/03/14 9:18 PM
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