IDEAS home Printed from https://ideas.repec.org/p/cuf/wpaper/772.html

Reclaiming Production: A Dynamic Mercantilist Model of Trade, Capability, and National Welfare

Author

Listed:
  • Heng-fu Zou

Abstract

This paper develops a dynamic model of national production strategy that departs from the neoclassical theory of comparative advantage and instead embraces a mercantilist framework grounded in strategic autonomy, endogenous learning, and civic-industrial preference. Building on the critiques of Cass (2023) and extending the Viner model of mercantilism (Zou, 1997), the model features a representative agent who derives utility from both consumption and domestic production, penalizes trade dependence, and internalizes the dynamic returns to learning-by-doing and apprenticeship-based labor formation. We formally characterize the agent's optimal intertemporal behavior and conduct numerical simulations that reveal sharp divergences between free-trade equilibria and production-centered strategies. The results demonstrate that industrial strength, innovation capacity, and economic sovereignty are cumulative and path-dependent--eroding under excessive trade reliance and com pounding under strategic reinvestment. The framework offers theoretical and empirical justification for reindustrialization, strategic trade policy, and the reconfiguration of global economic norms in favor of long-run national capability.

Suggested Citation

  • Heng-fu Zou, 2025. "Reclaiming Production: A Dynamic Mercantilist Model of Trade, Capability, and National Welfare," CEMA Working Papers 772, China Economics and Management Academy, Central University of Finance and Economics.
    • Handle: RePEc:cuf:wpaper:772
    as

    Download full text from publisher

    File URL: https://down.aefweb.net/WorkingPapers/w772.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Dani Rodrik, 1998. "Has Globalization Gone Too Far?," Challenge, Taylor & Francis Journals, vol. 41(2), pages 81-94, March.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Xiawei Li & Dihai Wang & Maohua Wu & Hongyi Xu, 2026. "The Service Paradox: Structural Transformation as a Growth Drag in Modern Economies," Annals of Economics and Finance, Society for AEF, vol. 27(1), pages 27-60, May.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. repec:ehl:lserod:22334 is not listed on IDEAS
    2. Holger Görg & Dennis Görlich, 2015. "Offshoring, wages and job security of temporary workers," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 151(3), pages 533-554, August.
    3. Dani Rodrik, 2018. "Populism and the economics of globalization," Journal of International Business Policy, Palgrave Macmillan, vol. 1(1), pages 12-33, June.
    4. Pica Giovanni, 2010. "Capital Markets Integration and Labor Market Institutions," The B.E. Journal of Macroeconomics, De Gruyter, vol. 10(1), pages 1-57, March.
    5. Ocampo, José Antonio, 2001. "Raúl Prebisch and the development agenda at the dawn of the twenty-first century," Revista CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), December.
    6. Deborah L. Swenson, 2007. "Competition and the location of overseas assembly," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 40(1), pages 155-175, February.
    7. Sato, Hitoshi & Zhu, Lianming, 2014. "Tariff reductions and labor demand elasticities : evidence from Chinese firm-level data," IDE Discussion Papers 463, Institute of Developing Economies, Japan External Trade Organization(JETRO).
    8. Olivier Godart & Holger Görg & David Greenaway, 2013. "Domestic multinationals, foreign affiliates, and labour demand elasticities," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 149(4), pages 611-630, December.
    9. Uwe Jirjahn, 2021. "Foreign ownership and intra-firm union density in Germany," Economic and Industrial Democracy, Department of Economic History, Uppsala University, Sweden, vol. 42(4), pages 1052-1079, November.
    10. Zamagni, Stefano & Pietrobelli, Carlo, 2000. "The emerging economies in the global financial market: some concluding remarks," Libros de la CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), number 2243.
    11. Buch, Claudia M. & Lipponer, Alexander, 2010. "Volatile multinationals? Evidence from the labor demand of German firms," Labour Economics, Elsevier, vol. 17(2), pages 345-353, April.
    12. Andersen, Torben M., 2005. "Product market integration, wage dispersion and unemployment," Labour Economics, Elsevier, vol. 12(3), pages 379-406, June.
    13. Komlos, John & Schubert, Hermann, 2019. "Les origines du triomphe de Donald Trump," Revue de la Régulation - Capitalisme, institutions, pouvoirs, Association Recherche et Régulation, vol. 26.
    14. Philip Du Caju & François Rycx & Ilan Tojerow, 2012. "Wage structure effects of international trade in a small open economy: the case of Belgium," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 148(2), pages 297-331, June.
    15. Ocampo Jose Antonio, 2010. "Rethinking Global Economic and Social Governance," Journal of Globalization and Development, De Gruyter, vol. 1(1), pages 1-29, January.
    16. James E. Rauch & Vitor Trindade, 2000. "Information and Globalization: Wage Co-Movements, Labor Demand Elasticity, and Conventional Trade Liberalization," NBER Working Papers 7671, National Bureau of Economic Research, Inc.
    17. Puja Vasudeva Dutta, 2007. "Trade Protection and Industry Wages in India," ILR Review, Cornell University, ILR School, vol. 60(2), pages 268-286, January.
    18. Vannoorenberghe, G. & Janeba, E., 2016. "Trade and the political economy of redistribution," Journal of International Economics, Elsevier, vol. 98(C), pages 233-244.
    19. Sudip Ranjan Basu, 2005. "Correlating Growth with Well-Being during Economic Reforms Evidence from India and China," Development and Comp Systems 0509010, University Library of Munich, Germany.
    20. Holger Görg & Michael Henry & Eric Strobl & Frank Walsh, 2009. "Multinational companies, backward linkages, and labour demand elasticities," Canadian Journal of Economics, Canadian Economics Association, vol. 42(1), pages 332-348, February.
    21. Pierce O’Reilly, 2018. "Tax policies for inclusive growth in a changing world," OECD Taxation Working Papers 40, OECD Publishing.

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;
    ;
    ;
    ;
    ;
    ;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cuf:wpaper:772. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Qiang Gao (email available below). General contact details of provider: https://edirc.repec.org/data/emcufcn.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.