Output Set, Convexity, Specialization And Trade In The Absence Of Comparative Advantages

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Output Set, Convexity, Specialization And Trade In The Absence Of Comparative Advantages

Author Info

SHUNTIAN YAO () (School of Humanities and Social Sciences, Nanyang Technological University, Nanyang Avenue, 639798, Singapore)

Abstract

Classical trade theory is based on exogenous comparative advantage. The existence of equilibrium is derived under the assumption that the output sets are (weakly) convex. In general, however, in the presence of transaction costs or in the case of production techniques with increasing returns to scale, this convexity requirement is no longer satisfied, and the comparative advantage may also disappear.Pioneered by Arrow, Ng and Yang, some researches have been done on specialization and trade in the absence of comparative advantages, and the basic assumption is that the agents have production techniques with increasing returns to scale.In this paper it is pointed out that, with more than one factor of production, increasing returns to scale is no longer sufficient for promoting specialization and trade. Based on the property of the output set and the PPF, the author proposes some new criteria as sufficient conditions for the promotion of specialization and trade.

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Publisher Info
Article provided by World Scientific Publishing Co. Pte. Ltd. in its journal Division of Labor & Transaction Costs.

Volume (Year): 02 (2006)
Issue (Month): 01 ()
Pages: 15-35
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Handle: RePEc:wsi:dltcxx:v:02:y:2006:i:01:p:15-35

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Find related papers by JEL classification:
C62 - Mathematical and Quantitative Methods - - Mathematical Methods and Programming - - - Existence and Stability Conditions of Equilibrium
D - Microeconomics
E1 - Macroeconomics and Monetary Economics - - General Aggregative Models
F - International Economics
F11 - International Economics - - Trade - - - Neoclassical Models of Trade
F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies
F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
J2 - Labor and Demographic Economics - - Demand and Supply of Labor
J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
L - Industrial Organization
O - Economic Development, Technological Change, and Growth

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