IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/94996.html

General Trade Equilibrium of Integrated World Economy

Author

Listed:
  • Guo, Baoping

Abstract

The price-trade equilibrium as a central task of international economics is not fulfilled yet, even for the simplest 2x2x2 Heckscher-Ohlin model, due to its complexities. This paper explored the equilibrium by a simple geometrical derivation within the IWE. The study demonstrated that the endogenous factor price equalized is the function of world factor endowments and it has four important features: (i) it makes sure that countries participating in free trade gain from trade. (ii) it is the Dixit-Norman price that remains the same when the allocation of factor endowments changes within the IWE box. The FPE is unique for a giving IWE problem. (iii) the price-trade equilibrium displays the Heckscher-Ohlin theorem directly. (iv) the relative factor price (wage/rental ratio) is not related to technologies. The study also demonstrated the equilibrium relationship for the model with the context of two factors, two commodities, and multiple countries. The new economic logic from this the equilibrium is that world factor endowments determine world price (common commodity price and factor price).

Suggested Citation

  • Guo, Baoping, 2015. "General Trade Equilibrium of Integrated World Economy," MPRA Paper 94996, University Library of Munich, Germany, revised Feb 2019.
    • Handle: RePEc:pra:mprapa:94996
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/94996/1/MPRA_paper_94992.pdf
    File Function: original version
    Download Restriction: no
    File URL: https://mpra.ub.uni-muenchen.de/99107/1/MPRA_paper_99107.pdf
    File Function: revised version
    Download Restriction: no
    File URL: https://mpra.ub.uni-muenchen.de/111118/1/MPRA_paper_111118.pdf
    File Function: revised version
    Download Restriction: no
    File URL: https://mpra.ub.uni-muenchen.de/107732/1/MPRA_paper_107732.pdf
    File Function: revised version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Daniel Bernhofen & Rod Falvey & David Greenaway & Udo Kreickemeier (ed.), 2013. "Palgrave Handbook of International Trade," Palgrave Macmillan Books, Palgrave Macmillan, number 978-0-230-30531-1, July.
    2. Chipman, John S, 1969. "Factor Price Equalization and the Stolper-Samuelson Theorem," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 10(3), pages 399-406, October.
    3. 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..
    4. Ronald W. Jones, 2018. "The Structure of Simple General Equilibrium Models," World Scientific Book Chapters, in: International Trade Theory and Competitive Models Features, Values, and Criticisms, chapter 4, pages 61-84, World Scientific Publishing Co. Pte. Ltd..
    5. Avinash Dixit, 2012. "Paul Samuelson's Legacy," Annual Review of Economics, Annual Reviews, vol. 4(1), pages 1-31, July.
    6. Alan Woodland, 2013. "General Equilibrium Trade Theory," Palgrave Macmillan Books, in: Daniel Bernhofen & Rod Falvey & David Greenaway & Udo Kreickemeier (ed.), Palgrave Handbook of International Trade, chapter 3, pages 39-87, Palgrave Macmillan.
    7. Baoping Guo, 2005. "Endogenous Factor-Commodity Price Structure by Factor Endowments," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 11(4), pages 484-484, November.
    Full references (including those not matched with items on IDEAS)

    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. Guo, Baoping, 2019. "The Simplest Factor Price Non-Equalization When Countries Have Different Productivities," MPRA Paper 95015, University Library of Munich, Germany, revised 12 Jul 2019.
    2. Guo, Baoping, 2015. "Equalized Factor Price and Integrated World Equilibrium," MPRA Paper 92051, University Library of Munich, Germany, revised Feb 2019.
    3. Guo, Baoping, 2019. "World Equivalent Factor Endowments Determine Local Factor Rewards When Countries Have Different Productivities," MPRA Paper 94004, University Library of Munich, Germany.
    4. Guo, Baoping, 2017. "World Resources Determine World Prices," MPRA Paper 91095, University Library of Munich, Germany, revised 13 Dec 2018.
    5. Baoping GUO, 2019. "Trade effects based on general equilibrium," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania / Editura Economica, vol. 0(1(618), S), pages 159-168, Spring.
    6. repec:agr:journl:v:1(618):y:2019:i:1(618):p:159-168 is not listed on IDEAS
    7. Guo, Baoping, 2018. "World Equalized Factor Price and Integrated World Trade Space," MPRA Paper 92503, University Library of Munich, Germany, revised Feb 2019.
    8. 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.
    9. Guo, Baoping, 2015. "Leontief Paradox Explored A New Trade Pattern When Countries Have Different Technologies," MPRA Paper 96929, University Library of Munich, Germany, revised Nov 2019.
    10. Baoping Guo, 2023. "Integrated Price-Trade Equilibrium by World Factor Endowments," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 29(3), pages 193-205, August.
    11. Zissimos, Ben, 2017. "A theory of trade policy under dictatorship and democratization," Journal of International Economics, Elsevier, vol. 109(C), pages 85-101.
    12. Feng Dai & Songtao Wu & Ling Liang & Zifu Qin, 2016. "Bilateral Trade under Environmental Pressure: Balanced Growth," Journal of Industry, Competition and Trade, Springer, vol. 16(2), pages 209-231, June.
    13. Chakrabarti, Avik, 2004. "Asymmetric adjustment costs in simple general equilibrium models," European Economic Review, Elsevier, vol. 48(1), pages 63-73, February.
    14. Naoko Shinkai, 2000. "Does the Stopler-Samuelson Theorem Explain the Movement in Wages? The Linkage Between Trade and Wages in Latin American Countries," Research Department Publications 4237, Inter-American Development Bank, Research Department.
    15. Naoko Shinkai, 2000. "¿Explica el teorema Stopler-Samuelson el desplazamiento de los salarios? El vínculo entre el comercio internacional y los salarios en países latinoamericanos," Research Department Publications 4238, Inter-American Development Bank, Research Department.
    16. Jiandong Ju & Shang-Jin Wei, 2014. "A Solution to Two Paradoxes of International Capital Flows," Economic and Political Studies, Taylor & Francis Journals, vol. 2(1), pages 3-43, January.
    17. Burda, Michael C. & Zessner-Spitzenberg, Leopold, 2024. "Greenhouse Gas Mitigation and Price-Driven Growth in a Solow-Swan Economy with an Environmental Limit," IZA Discussion Papers 16771, Institute of Labor Economics (IZA).
    18. Henry Thompson, 1995. "Free trade and income redistribution in some developing and newly industrialized countries," Open Economies Review, Springer, vol. 6(3), pages 265-280, July.
    19. Yu, Eden S.H. & Chao, Chi-Chur, 2021. "Non-traded goods, firm dynamics and wages in a service economy," Journal of Asian Economics, Elsevier, vol. 76(C).
    20. Xiao Chen & Hanwei Huang & Jiandong Ju & Ruoyan Sun & Jialiang Zhang, 2022. "Endogenous cross-region human mobility and pandemics," CEP Discussion Papers dp1860, Centre for Economic Performance, LSE.
    21. Kevin J. Murphy, 2003. "A General Equilibrium Model of the Payroll Tax Incidence of State Unemployment Insurance Systems," Public Finance Review, , vol. 31(1), pages 44-65, January.

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;
    ;
    ;
    ;

    JEL classification:

    • A2 - General Economics and Teaching - - Economic Education and Teaching of Economics
    • A23 - General Economics and Teaching - - Economic Education and Teaching of Economics - - - Graduate
    • F1 - International Economics - - Trade
    • F10 - International Economics - - Trade - - - General
    • F15 - International Economics - - Trade - - - Economic Integration

    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:pra:mprapa:94996. 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: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.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.