The "institutional factor" in the theory of international trade: new vs. old trade theories
Abstract The New Trade Theory presents novel perspectives compared to the Old Theories of international trade. Increasing returns and different institutional arrangements can explain the international specialization and trade flows even between countries which are identical in terms of factor endowments, technology and preferences for private goods. In this context the pattern of trade cannot be determined by a price/cost comparison of isolated countries. Comparative advantages can be affected by historical accidents and become a solution to a general political-economic equilibrium system. As a consequence, the institutional factor appears as a crucial element in a non purely verbal distinction between theories of interregional trade and theories of international trade. This distinction is acknowledged in the non analytical discourse of the Old Trade Theories, but it is seldom revealed in the formal models by which such theories are formulated. The New Trade Theory has the merit of dealing with this hidden factor explicitly. This paper presents 1) a reappraisal of some ideas of Smith, Ricardo and Ohlin which anticipate the role assigned to the institutional factor in the New Theory; 2) a critical assessment of how this factor is modeled in the New Trade Theory 3) an evaluation of the progress brought about by the New Trade Theory; 4) an indication of how the same factor can be treated in the light of the Old Trade Theories.
|Date of creation:||2000|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://mpra.ub.uni-muenchen.de
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Ethier, Wilfred J., 1984. "Higher dimensional issues in trade theory," Handbook of International Economics, in: R. W. Jones & P. B. Kenen (ed.), Handbook of International Economics, edition 1, volume 1, chapter 3, pages 131-184 Elsevier.
- Metcalfe, J S & Steedman, Ian, 1972. "Reswitching and Primary Input Use," Economic Journal, Royal Economic Society, vol. 82(325), pages 140-57, March.
- Deardorff, Alan V, 1980. "The General Validity of the Law of Comparative Advantage," Journal of Political Economy, University of Chicago Press, vol. 88(5), pages 941-57, October.
- Akerlof, George A, 1976. "The Economics of Caste and of the Rat Race and Other Woeful Tales," The Quarterly Journal of Economics, MIT Press, vol. 90(4), pages 599-617, November.
- Richard H. Clarida & Ronald Findlay, 1991. "Endogenous Comparative Advantage, Government, and the Pattern of Trade," NBER Working Papers 3813, National Bureau of Economic Research, Inc.
- Lancaster, Kelvin, 1980. "Intra-industry trade under perfect monopolistic competition," Journal of International Economics, Elsevier, vol. 10(2), pages 151-175, May.
- Casella, Alessandra, 1995. "Free Trade and Evolving Standards," CEPR Discussion Papers 1204, C.E.P.R. Discussion Papers.
- Jones, Ronald W & Scheinkman, Jose A, 1977. "The Relevance of the Two-Sector Production Model in Trade Theory," Journal of Political Economy, University of Chicago Press, vol. 85(5), pages 909-35, October.
- Sergio Parrinello, 1999. "Explaining and Understanding Economic Events by Contrasting Alternatives," Metroeconomica, Wiley Blackwell, vol. 50(3), pages 325-350, October.
- Basu, Kaushik & Jones, Eric & Schlicht, Ekkehart, 1987.
"The growth and decay of custom: The role of the new institutional economics in economic history,"
Explorations in Economic History,
Elsevier, vol. 24(1), pages 1-21, January.
- Basu, Kaushik & Jones, Eric & Schlicht, Ekkehart, 1987. "The Growth and Decay of Custom: The Role of the New Institutional Economics in Economic History," MPRA Paper 3790, University Library of Munich, Germany.
- Basu, Kaushik & Jones, Eric & Schlicht, Ekkehart, 1987. "The Growth and Decay of Custom: The Role of the New Institutional Economics in Economic History," Munich Reprints in Economics 3328, University of Munich, Department of Economics.
- Field, Alexander James, 1981. "The problem with neoclassical institutional economics: A critique with special reference to the North/Thomas model of pre-1500 Europe," Explorations in Economic History, Elsevier, vol. 18(2), pages 174-198, April.
- Alessandra Casella & Jonathan S. Feinstein, 1990.
"Public Goods in Trade: On the Formation of Markets and Political Jurisdictions,"
NBER Working Papers
3554, National Bureau of Economic Research, Inc.
- Casella, Alessandra & Feinstein, Jonathan, 1991. "Public Goods in Trade: On the Formation of Markets and Political Jurisdictions," CEPR Discussion Papers 511, C.E.P.R. Discussion Papers.
- Smith, Alasdair, 1984. "Capital theory and trade theory," Handbook of International Economics, in: R. W. Jones & P. B. Kenen (ed.), Handbook of International Economics, edition 1, volume 1, chapter 6, pages 289-324 Elsevier.
- repec:cup:cbooks:9780521259675 is not listed on IDEAS
- Field, Alexander James, 1991. "Do legal systems matter?," Explorations in Economic History, Elsevier, vol. 28(1), pages 1-35, January.
- Paul Krugman, 1986. "Strategic Trade Policy and the New International Economics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262610450, June.
- Kindleberger, Charles P, 1983. "Standards as Public, Collective and Private Goods," Kyklos, Wiley Blackwell, vol. 36(3), pages 377-96.
- North, Douglass C., 1979. "A framework for analyzing the state in economic history," Explorations in Economic History, Elsevier, vol. 16(3), pages 249-259, July.
- Lindbeck, Assar, 1976. "Stabilization Policy in Open Economies with Endogenous Politicians," American Economic Review, American Economic Association, vol. 66(2), pages 1-19, May.
- Brecher, Richard A, 1974. "Minimum Wage Rates and the Pure Theory of International Trade," The Quarterly Journal of Economics, MIT Press, vol. 88(1), pages 98-116, February.
When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:31472. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ekkehart Schlicht)
If references are entirely missing, you can add them using this form.