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The Stolper-Samuelson Trade Effects Trigger the Rybczynski Trade Effects Negatively

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  • Guo, Baoping

Abstract

Most literature talks about trade effects of price changes on outputs in international economics as that a price increase of a good will lead to an expansion of the output of that good and a reduction in the output of the other good (see Bhagwati, Panagariya, and Srinivasan, 1998, p. 62). It only tells the story from the supply side. It is not in line with the fundamental economic principle, the law of demand, that says that there is an inverse (or negative) relationship between the price of a good (or service) and the quantity demanded. This study investigates it again based on the price-trade equilibrium from integrated world equilibrium (IWE). The paper shows that the overall result of supply and demand by the equilibrium is that a price increase of a good leads to a reduction in the output of that good and an increase in the output of another good. It is just a process of the Stolper-Samuelson trade effects negatively triggering the Rybczynski trade effects. The study proves the law of demand analytically.

Suggested Citation

  • Guo, Baoping, 2021. "The Stolper-Samuelson Trade Effects Trigger the Rybczynski Trade Effects Negatively," MPRA Paper 113674, University Library of Munich, Germany, revised Jul 2022.
    • Handle: RePEc:pra:mprapa:113674
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    References listed on IDEAS

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    1. Alan V. DEARDORFF, 2011. "Weak Links In The Chain Of Comparative Advantage," World Scientific Book Chapters, in: Robert M Stern (ed.), Comparative Advantage, Growth, And The Gains From Trade And Globalization A Festschrift in Honor of Alan V Deardorff, chapter 9, pages 59-71, World Scientific Publishing Co. Pte. Ltd..
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    4. Alan V. Deardorff, 2011. "The possibility of factor price equalization, revisited," World Scientific Book Chapters, in: Robert M Stern (ed.), Comparative Advantage, Growth, And The Gains From Trade And Globalization A Festschrift in Honor of Alan V Deardorff, chapter 15, pages 155-163, World Scientific Publishing Co. Pte. Ltd..
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    More about this item

    Keywords

    Factor price equalization; Heckscher-Ohlin Model; Equilibrium price; Trade Effects; General Trade Equilibrium;
    All these keywords.

    JEL classification:

    • F1 - International Economics - - Trade
    • F15 - International Economics - - Trade - - - Economic Integration

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