Table Of ContentSpringer Texts in Business and Economics
Giancarlo Gandolfo
International
Trade Theory
and Policy
With contributions by Federico Trionfetti
Second Edition
Springer Texts in Business and Economics
Forfurthervolumes:
http://www.springer.com/series/10099
Giancarlo Gandolfo
International Trade Theory
and Policy
Second edition
With contributions by Federico Trionfetti
123
GiancarloGandolfo
AccademiaNazionaledeiLincei
ClassediScienzeMorali
Rome,Italy
ISBN978-3-642-37313-8 ISBN978-3-642-37314-5(eBook)
DOI10.1007/978-3-642-37314-5
SpringerHeidelbergNewYorkDordrechtLondon
LibraryofCongressControlNumber:2013943689
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To thememoryof myfather
EdgardoGandolfo
Preface
There is no lack of good international economics textbooks ranging from the
elementary to the advanced, so that an additional drop in this ocean calls for
an explanation. In the present writer’s opinion, there seems still to be room for
a textbook which can be used in both undergraduate and graduate courses and
whichcontainsa widerangeoftopics,includingthoseusuallyomittedfromother
textbooks. These are the intentions behind the present book, which is an outcrop
fromundergraduateandgraduatecoursesininternationaleconomicsthattheauthor
has been holding at the Sapienza University of Rome and other universities from
1974to2010andfromhisongoingresearchworkinthisfield.
Accordingly, the work is organised as two-books-in-one by distributing the
materialbetweentextandappendices.
The treatment in the text is directed to undergraduate students and is mainly
confinedtographicanalysisandtosomeelementaryalgebra,butitisassumedthat
thereaderwillhaveabasicknowledgeofmicroeconomics(sothattheusualreview
materialonproductionfunctions,indifferencecurves,etc.isomitted).Eachchapter
hasa mathematicalappendix,where(i) thetopicstreatedin thetextareexamined
at a level suitable for advanced undergraduate or first-year graduate students and
(ii) generalisations and/or topics not treated in the text (including some at the
frontiersofresearch,whoseoftenobscuremathematicalaspectsarefullyclarified)
areformallyexamined.
The text is self-contained, and the appendices can be read independently of
the text and can, therefore, also be used by students who already know ‘graphic’
international economics and want to learn something about its mathematical
counterpart.Of course the connections between text and appendicesare carefully
indicated,sothatthelattercanbeusedasmathematicalappendicesbythestudent
whohasmasteredthetextandthetextcanbeusedasgraphicandliteraryexposition
of the results derived mathematically in the appendices by the student who has
masteredthese.
The book is mainly analytical, although reality is present through sections on
the empirical verification of the main theories and through case studies and other
empirical materials contained in appropriate boxes. However, by stressing the
vii
viii Preface
analyticalaspects,theauthorhopestogivethestudentthetoolsforanunderstanding
offactsandpolicies—toolsthatwillsurvivethecircumstancesofthepassingday.
This new edition has been thoroughly revised and enriched thanks to the
contributions by Professor Federico Trionfetti of Aix-Marseille University (Aix-
MarseilleSchoolofEconomics),CNRSandEHESS,thatbringthebookuptodate.
He has contributed sections of Chaps.4, 9, and the entire Chaps.16 and 17, plus
severalminorrevisions.HewishestothanktheparticipantsintheBrixenWorkshop
and Summer School 2012 as well as the master’s students of the Aix-Marseille
SchoolofEconomicsforpreciouscomments.
***
I am gratefulto thestudentsfromalloverthe worldwhohavewrittenme over
the years to indicate unclear points and misprints of the previous editions and to
Marianna Belloc, Nicola Cetorelli, Giuseppe De Arcangelis, Vivek H. Dehejia,
Laura Sabani, and Francesca Sanna Randaccio, for their advice and comments. I
amparticularlyindebtedtoDanielaFederici,whohasmadeveryusefulsuggestions
asregardsthenewmaterial,thencheckeditwithpainstakingcare.
Noneofthepersonsmentionedhaveanyresponsibilityforpossibledeficiencies
thatmightremain.
Rome,Italy GiancarloGandolfo
Contents
PartI Introduction
1 IntroductiontoInternationalTradeTheoryandPolicy................ 3
1.1 InternationalEconomicsasaDistinctSubject...................... 3
1.2 TheTheoryandPolicyofInternationalTrade:AnOverview...... 5
1.3 SmallandLargeOpenEconomies .................................. 6
References.................................................................... 7
PartII FoundationsofTradeTheory
2 TheClassical(Ricardo-Torrens)TheoryofComparativeCosts ...... 11
2.1 ComparativeCosts(Advantages)andInternationalTrade......... 11
2.2 AlternativeGraphicRepresentations................................ 14
2.3 AModernInterpretationinTermsofOptimization ................ 19
2.3.1 MaximizationofRealIncomeinEachCountry........... 19
2.3.2 MaximizationofRealWorldIncome...................... 21
2.4 Generalizations....................................................... 23
2.4.1 TwoGoodsandnCountries................................ 24
2.4.2 mGoodsandnCountries................................... 25
2.5 TheProblemoftheDeterminationoftheTermsofTrade ......... 29
References.................................................................... 30
3 TheNeoclassicalTheoryofInternationalTrade ....................... 33
3.1 TheTransformationCurveandtheBoxDiagram .................. 33
3.1.1 TheBoxDiagram........................................... 34
3.1.2 TheTransformationCurveandItsProperties............. 35
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