General Trade Equilibrium of Integrated World Economy

Guo, Baoping (2015): General Trade Equilibrium of Integrated World Economy.

Abstract

The general trade equilibrium is one of the most critical topics in international economics. Even for the simplest 2×2×2 Heckscher-Ohlin model, it is not easy to reach its equilibrium. This paper studies the approaches to get the general trade equilibrium and the structure of equalized factor prices. The most straightforward and convincing process is to use the trade volume defined by domestic factor endowments that Helpman and Krugman (1985) proposed. This paper uses their idea to attain the general trade equilibrium of factor price equalization relatively simply. The study shows that the equalized factor prices ensure gains from trade for both countries. The optimality property of the equilibrium is that the trade volume achieves its maximum value.

• Item Type: MPRA Paper
• Language: English
• Keywords: Factor content of trade; H-O model; trade; factor price equalization; Heckscher-Ohlin; General equilibrium of trade; Integrated World Equilibrium; IWE
• Subjects: A - General Economics and Teaching > A2 - Economic Education and Teaching of Economics; A - General Economics and Teaching > A2 - Economic Education and Teaching of Economics > A23 - Graduate; F - International Economics > F1 - Trade; F - International Economics > F1 - Trade > F10 - General; F - International Economics > F1 - Trade > F15 - Economic Integration

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