教学课件-国际贸易理论与实务(英文版)(第四版)

InternationalEconomics

PARTI:

InternationalTradeTheoryandPolicy

2018-2019(1)

WhatisInternationalEconomicsabout?

GainsfromtradeTradepatternsTradepolicy(andpolicyeffects)TradepolicycoordinationBalanceofpayments(国际收支)ExchangeratedeterminationInternationalcapitalmarketPartIPartIITheories

Ch.01OverviewofInternationalTradeCh.02ClassicalTradeTheoryCh.03NeoclassicalTradeTheoryCh.04Post-Hecksher-OhlinTheoryofTrade

Ch.05ArgumentsagainstFreeTrade

PoliciesCh.06ImportProtectionPolicy:TariffsCh.07ImportProtectionPolicy:Non-tariffBarriers

Ch.08ExportPromotionandOtherPoliciesInternationalpolicycoordinationCh.09RegionalEconomicIntegration

Ch.10GATT&WTOCourseOutline

§1Merchandisetrade§2Tradeincommercialservices§3China’sforeigntradeCh.1Overviewofinternationaltrade/pb//english/res_e/statis_e/wts_e.htm§1MerchandiseTradeMerchandisetradebymajorproductgroupingMerchandisetradebydestinationMerchandisetrade:visibletrade:

GothroughcustomsclearanceTransactionsareobservable.

Manufactured

goods(US$11tn.in2016)FuelsandminingproductsManufacturedgoods:Ironandsteel,chemicals,othersemi-manufactures,machineryandtransportequipment,textiles,clothingandotherconsuminggoods;Fuelsandminingproducts:Oresandotherminerals;fuelsandnon-ferrous（有色的，非铁的）metals;Agriculturalproducts:FoodandrawmaterialsAgricultural

products

20062007200820092010201120122013201420152016ManufacturedgoodsFuelsandminingproductsAgriculturalproducts2006200720082009201020112012201320142015201610%Agriculturalproducts13%Fuelsandminingproducts4%others73%Manufacturedgoods2%Ironandsteel12%Chemicals11%Officeandtelecomequipment9%Automotive5%Clothingandtextiles34%OthermanufacturedgoodsWorldmerchandiseexportsbymajorproductgroups,2016(Share,%)WorldmerchandiseexportsWTOmembersexportsUS$15.96tn.US$15.71tn.In2016ShareofdevelopingeconomiesShareoftop10traders53%41%EuropeNorthAmericaAsia

20062007200820092010201120122013201420152016Shareofdevelopingeconomiesinworldtrade,2000-201520062007200820092010201120122013201420152016China,Germany,Japan,Netherlands,UnitedStatesLeadingtradersinworldexportsofmerchandisetrade,2006-2016(Indices,2006=100)RatioofworldmerchandisetradevolumegrowthtoworldrealGDPgrowth,1981-2016(Annualpercentagechangeandratio)DefinitionsandmethodologyMerchandisetrade(exports&imports):accordingtogeneraltradedefinitionGeneraltrade:Itcoversalltradeflowsincludinggoodsshippedthroughcustomswarehousesandfreezones.Specialtrade:Itexcludescertaintradeflows,suchgoodsshippedthroughcustomswarehousesandfreezones.Generaltradeandspecialtradediffersmainlyinthewaywarehousedandre-exportedgoodsaretreated.GeneraltradefiguresarelargerthanthecorrespondingspecialtradefiguresCustomswarehouse(bondedwarehouse,保税仓库):

awarehouseinwhichdutiable(应缴税的)goodsarestoredwithoutpayingthedutiesonthem.Iftheimporterdecidestosellthegoodsforre-export,dutieswillnotbeincurred.Iftheimportedgoodsarereleasedforsale,however,customsdutieswillcomedue.Bonded:交了保证金或提供了担保的Value

（额/值）andvolume（量）ofinternationaltradeValueofinternationaltradeTotalvalueofinternationaltradeinmerchandiseandservices.

Aggregatedvalueofimportsorexports

?Answer:EXPORTS!

AsexportsofgoodsareusuallyvaluedatFOBexcludingthecostoftransportationandinsurance,

importsatCIF.Drawback:

Valueofinternationaltradeindifferentperiodis

incomparable.Pricechanges.Thevalueofinternationaltradecalculatedonconstant

price.Volume（量）ofinternationaltrade

19781979Q0P0Q1P1Steel100MT$400/MT120MT$420/MTWood200M3$5/M3250M3$6/M3Cloth1000M2$2/M21200M2$4/M2Totalvalue∑Q0P0=43,000∑Q1P1=$56,700Totalvolume(1979)=∑Q1P0=120*400+250*5+1200*2=$51,650Volume

index§2TradeincommercialservicesTradeincommercialservicesbycategoriesTradeincommercialservicesbydestinationFourmodesofservicesdefinedbyGATSInvisibletradeEstimatesareobtainedbyexaminingforeignexchange

recordsand/orthroughsurveysofestablishments(公司，企业).Usualcustomsrecordsordataarenotavailable

forvaluing

thesetransactions.Beunderestimatedorovervalued.20062007200820092010201120122013201420152016TravelTransportOthercommercialservicesGoods-relatedservicesWorldexportsincommercialservicesWTOmembersexportsincommercialservicesUS$4.8tn.US$4.73tn.In2016ShareofdevelopingeconomiesShareoftop10traders53%34%Shareofdevelopingeconomiesinworldtradeincommercialservices,2005-2015(percentage)

USAUKChinaGermanyFranceNetherlandsJapanIndiaSingaporeIreland

Leadingtradersofcommercialservices,2015(bn.US$)Duringthe1980s,exportsofcommercialservicesoutgrewmerchandiseexports.Developedeconomies:servicesaccountforlargeportionsofGDP.TheUnitedStateswastheworld'slargestexporterandimporterofcommercialservices.WTOGATS’fourmodesofservices

GeneralAgreementonTradeinServices(GATS)134Cross-bordersupply跨境交付Consumptionabroad境外消费Movementofnaturalpersons自然人流动

2Commercialpresence商业存在25Mode1(Cross-bordersupply):Mode1(Cross-bordersupply):fromtheterritoryofoneMemberintotheterritoryofanyotherMember Example:TransportTelecommunicationInsuranceFinancialservices……Mode2(Consumptionabroad)Mode2(ConsumptionAbroad):intheterritoryofoneMembertotheserviceconsumerofanyotherMember Example:TravelMode3(CommercialPresence)Mode3(CommercialPresence):byaservicesupplierofoneMember,throughcommercialpresenceintheterritoryofanyotherMember Example:FinancialservicesConsultingservicesEducationservices……Mode4(PresenceofNaturalPersons)Mode4(PresenceofNaturalPersons):byaservicesupplierofoneMember,throughpresenceofnaturalpersonsofaMemberintheterritoryofanyotherMember. Whichmodeofsupplyaccountsformostoftradeinservices?

Intermsofcommercialvalue,theshareofindividualmodesinworldservicestradehasbeenestimated.ModesofservicedeliveryShareofindividualmodesinworldservicesMode125-30%Mode210-15%Mode355-60%Mode42-3%§3China’sForeignTradeMerchandisetradeandtradeincommercialservicesin2016TradebymaincommoditygroupTradebydestinationTradebalance(particularlywiththeUSA)RatioofChina’smerchandisetradetoGDPMERCHANDISETRADEValueAnnualpercentagechangeMillionUS$2016

2010-2016exports,f.o.b.20981615imports,c.i.f.15874312

2016Shareinworldtotalexports:13.5%Shareinworldtotalimports:9.78%TRADEINCOMMERCIALSERVICESValueAnnualpercentagechangeMillionUS$2016

2010-2016exports,f.o.b.2077255imports,c.i.f.4498332

2016Shareinworldtotalexports:4.31%Shareinworldtotalimports:9.58%ExportsImportsLin,JustinYifuandYanWang(2008).“China’sIntegrationwiththeWorld:DevelopmentasaProcessofLearningandIndustrialUpgrading”China’stradebalanceFavorable/unfavorablebalanceoftrade(BOT)ThedifferencebetweenEXPORTvalueandIMPORTvalueFavourable

BOT:tradesurplus,positivebalanceof

trade,

EXPORTS>IMPORTS.UnfavorableBOT:tradedeficit,negativebalanceoftrade,

EXPORTS<IMPORTS.BOT:importantpartofthe

currentaccount(经常性账户)

ofanation’sbalanceofpayment(BOP)（国际收支平衡表).ChinatradebalanceinUSDbillionWTO,Tradeprofiles2017.DeterminantsofBOT:The

costofproduction

intheexportingeconomyrelativetothoseintheimportingeconomy;Exchangerate

movements;Multilateral,bilateralandunilateraltaxesor

restrictions

ontrade;Non-tariffbarriers;

Theavailabilityofadequate

foreignexchange

withwhichtopayforimports,etc.Businesscycle:e.g.economicexpansion.

Ahighersavingsrategenerallycorrespondstoatradesurplus.

China,ahighgrowtheconomy,hastendedtorunmerchandisetradesurpluses.Favorable

BOTfornearlytwodecadesinsuccessionsince1994.TheUnitedStates

hasalowersavingsrateandhashadagrowing

deficit

intradablegoodssincethemid-1980s.EspeciallywithAsiannations(ChinaandJapan)whichnowholdlargesumsofU.SdebtthathasfundedtheconsumptionoftheUnitedStates.

TheratioofexportsandimportsofgoodstoGDP.exports-to-GDPratiomorecommonIndicatetheopennessofaneconomyButresultsshouldnotbeinterpretedasatradepolicy

indicator.Anincreaseinthevalueoftrademaynotbeaconsequenceoftradeliberalization.Increaseofexportprice(e.g.oil)IncreaseofimportpricedepressesdomesticeconomicactivityExchangeratefluctuations

RatioofChina’smerchandisetradetoGDP(外贸依存度)Ingeneral,theratioinChinahasbeenincreasing.Argument1:Toohigh,potentialrisks.Argument2:Theratioshouldbeunderstoodcorrectly.Highproportionofprocessingtrade,indicatinghighimportsbeingassociatedwithhighexports.(processwithsuppliedmaterials,parts,samplesandcompensationtrade“三来一补”)China'sGDPhasprobablybeenunder-valued.“对外贸易是增加我们财富和现金的通常手段，在这一点上我们必须时时谨守这一原则。在价值上，每年卖给外国人的货物，必须比我们消费他们的多。”——托马斯·孟（《英国得自对外贸易的财富》1664年，中译本，第4页）“如果两人都能制造鞋子和帽子，其中一个人在两种职业上都比另一个人强一些，不过制帽子时只强1/5或20%，而制鞋子时则强1/3或33%，那么，这个较强的人专门制鞋子，而那个较差的人专门制帽子，岂不是对双方都有利吗？”

——大卫·李嘉图

（王亚南主编《资产阶级古典政治经济学选辑》

第533页，商务印书馆，1979年）

Ch.2ClassicalTradeTheoryMercantilismDavidHume’sprice-specie-flowmechanismThetheoryofabsoluteadvantageThetheoryofcomparativeadvantage1.ThemercantilisteconomicsystemNationalwealth

(2)Economicactivity:zero-sumgame.零和博弈

(Onecountry'seconomicgainwasattheexpenseofanother)(3)Accumulationofwealththroughtrade.

Favorablebalanceoftradewouldhelptoearngold.

§1MercantilismAFrenchseaportpaintedby

ClaudeLorrain

around1639,attheheightofmercantilismBullionism

拜金主义DominantschoolofeconomicthoughtinEuropeduring1500-17502.Economicpoliciespursuedbythemercantilists(1)Controltheuseandexchangeofpreciousmetals.(2)Prohibittheexportofpreciousmetalsbyindividuals.

Rulersletspecieleavethecountryonlyoutofnecessity.(3)Smugglersofspecieweresubjecttoswiftpunishment,oftendeath.(4)Exclusivetradingrightsforcertainroutesorareasweregiventospecificcompanies.(5)Subsidizeexports,restrictimportsofconsumptiongoods.TheDutchEastIndiaTradingCompany

§2DavidHume’sChallengetoMercantilism

MSV=PYArgumentagainstthemercantilistideaforTRADESURPLUSTheprice-specie-flowmechanism价格-货币流动机制QuantityTheoryofMoney货币数量论DirectrelationshipbetweenmoneysupplyandpricelevelEx>Im

GoldinflowP

ExIm大卫·休谟（1711-1776）

§3AdamSmith’sTheoryofAbsoluteAdvantage

AdamSmithpublished

TheWealthofNations（国富论）

in1776inLondon.Adam’stwomainareasofcontribution:

absoluteadvantageandthedivisionoflabor.Absoluteadvantage:abilitytoproduceagood

with

fewerlaborhours

thananothercountry.

Assumptionsofthetheoryofabsoluteadvantage(1)2countries,2products.1factorofproduction;(2)Fixedendowmentofresourcesandtechnologylevel;(3)Factorsofproductionmobilewithinacountry,immobilebetweencountries;(4)Alabortheoryofvalue;(5)Constantproductioncosts;(6)Fullemployment;(7)Perfectcompetition;

(8)Nogovernmentinterventionineconomicactivity;

(9)Transportationcostsarezero.

2.ChallengetoMercantilism(1)Productivecapacity

nation'swealth(2)Specializationproductivitygains.(3)Specializeinandexportgoodsthatanationhas

absoluteadvantages.(4)Freeenvironment.(laissezfaire[lei′sei′feər])3.ExampleLaborrequirementsinBritainandPortugal(perunit)ClothWineBritain1hr.4hrs.

Portugal2hrs3hrs.

Absoluteadvantage?Britain:3C(ratherthan4C)for1W.(Save1C)Portugal:1/3W(ratherthan2/3W)for1C.(Save1/3W)Priceratioinautarky1W:4C

(or1C:1/4W)

1W:3/2C(or1C:2/3W)Exchangeratio?Britain:

ClothPortugal:Wine1W:3C(1C:1/3W)ComparativeadvantageDavidRicardo,inhis1819workOnthePrinciplesofPoliticalEconomyandTaxationComparativeadvantage:Theabilityofacountrytoproduceagoodatalower

RELATIVECOSTthananothercountry.

§4TheoryofComparativeAdvantage

2.ExampleLaborrequirementsandabsoluteadvantageinBritainandPortugal(perunit)WineClothPriceratioinautarkyPortugal8

hrs.9hrs.Britain12hrs.10hrs.1W:8/9C1W:6/5CWhichcountryhasanabsoluteadvantage

inwhatgood(s)?Portugal:

Both.Whichcountryhasacomparativeadvantageinwhatgood?Portugal:Wine.Britain:Cloth.RelativecostRelativecostofwinetoclothinPortugal(8/9)isLOWERthaninBritain(6/5),thusPortugalhasacomparativeadvantageinWine.IfaLA/aLB

inCountryIisLOWERthaninCountryII,thenCountryIhasacomparativeadvantageinProductA.RelativecostsinBritainandPortugalWineClothRelativecostofwinetoclothPortugal8

hrs.9hrs.8/9Britain12hrs.10hrs.6/5OpportunitycostTwowaystoillustratethegainsfromtrade:(1)Intermsoflabortimesaved(at1W:1C)Britain:1C(10hrs)for1W(12hrs)

saves2hrs.Portugal:1W(8hrs)for1C(9hrs)saves1hr.

1W:1.1C?(2)IntermsofmoregoodsobtainedAfterdivisionoflabor

WineClothPortugal(8+9)/8=2.125

Britain(10+12)/10=2.2Aftertradingat1W:1CWineClothPortugal1.1251Britain11.2Ricardo’stheoryholds:Acountrymayhavenoabsoluteadvantageinallproducts.However,it

surelyhasacomparativeadvantageinaparticularproduct.Acountrycanbenefitfromexportifonlyithasacomparativeadvantageintheproductionoftheexportingproduct.Anycountrywillhaveaproducttoexportandgainfrominternationaltrade.3.Analysisofthetheoryofcomparativeadvantageby

usingmoderntools(1)Toolstobeused①Productionpossibilitycurve(frontier)PPFY0X1X2BXProductionpossibilitycurve

·

E

·

F

C·

·D

AY1

Y2Agraphthatreflects

allthecombinationsofproductsthatacountrycanproducegivenitsresourcesarefullyutilized.Astraightlineofsloperepresentstheopportunitycostsofproductionarethesameatthevariouslevelsofproduction.

A0

BXYPPFofCountryIA0BXYPPFofCountryIITheslopeoflineABintheleftfigureissmallerthantheslopeoflineABintherightfigure,indicatingthattheopportunitycostofgoodXinCountryIissmallerthaninCountryIIandCountryIhasacomparativeadvantageingoodXwhileCountyIIhasacomparativeadvantageingoodY.

(PX/Y)I<(PX/Y)II②Communityindifferencecurves

Anillustrationofvariouscombinationsoftwocommoditiesthatyieldthesamelevelofwell-beingforthecommunity(orcountry)asawhole.The(negativeofthe)slopeatanypointonanindifferencecurveiscalledthemarginalrateofsubstitution.

(MRS=MUX/MUY)Theindifferencecurveisdown-slopingandconvextotheorigin,meaningadiminishingMRS..CIC1CIC2CIC3XYY1Y2Communityindifferencecurves0X1X2A·B·CIC'1

·

•

A'(2)Equilibriumanalysis

①Generalequilibriuminautarky

CIC1

A

•Y0X1Y1CountryI

•

CountryIIY'1X1YX'10XX

PX/Y

P'X/YCIC'1

·

•A'

CIC1

Pw

A

•Y0Y1CIC1CountryI

•

CountryIIY'1X1YX'10XX②IntroductionoftradeBB'

•

E

E'

Pw

PX/Y

PX/YX2Y2

X'2

Y'2CIC'2

CIC2EquilibriumpointsandgainswithtradeforCountriesI&IIwhenopportunitycostsofproductionareconstant.•

CHAPTER3NEOCLASSICALTRADETHEORY

GainsfromTradeinNeoclassicalTradeTheoryReciprocalDemandTheoryFactorEndowmentTheoryTheLeontiefParadox

IncreasingopportunitycostsonthePPFTheshapeisconcavetotheoriginorbowedout.YY1Y2Y3Y40X1X2X3X4XX1X2=X2X3=X3X4Y1Y2<Y2Y3<Y3Y4YY1Y2Y3Y40X1X2X3X4XY1Y2=Y2Y3=Y3Y4X3X4<X2X3<X1X2Figure3-1(b)

IncreasingopportunitycostsonthePPF§1GainsfromTradeinNeoclassicalTradeTheory

Figure3-1(a)

IncreasingopportunitycostsonthePPF

X0CountryIFigure3-2(a)CountryI’sPPFX0CountryIIYFigure3-2(b)CountryII’sPPFThePPFofCountryIshowsatechnologythatisrelativelymoreefficientintheproductionofX.ThePPFofCountryIIshowsatechnologythatisrelativelymoreefficientintheproductionofY.

Y2.Generalequilibriumandgainsinautarky·A′·P’X/Y0X′1CIC′YY'1Figure3-3(b)TheequilibriumpointinautarkyforCountryIIisatpointA′whenPX/PY=PA’A·PX/YX0

X1CIC1Y1·Figure3-3(a)TheequilibriumpointinautarkyforCountryIisatpointAwhenPX/PY=PACountryI(Gains:OX1,OY1)CountryII

(Gains:OX’1,OY’1)Yx·A3.GeneralequilibriumandgainsaftertheintroductionofinternationaltradeAs(PX/PY)I<(PX/PY)II,CountryIhasacomparativeadvantageingoodXwhileCountryIIhasacomparativeadvantageingoodY.

CountryIshouldspecializeinandexportgoodX；CountryIIshouldspecializeinandexportgoodY。PX/Y<PW<P'X/YflatterthantheautarkypricelineinCountryIIsteeperthantheautarkypricelineinCountryI.A·PX/YX0CIC1CIC2E•B

x1x2

Y·Figure3-4(a)EquilibriumpointsandgainsinautarkyandwithtradeforCountryIwhenopportunitycostsofproductionareincreasing.PWAtpointECountryIgainsX1X2moreofgoodXandY1Y2moreofproductY.AtpointE’CountryIIgainsX’1X’2moreofgoodXandY’1Y’2moreofproductY.•Y2Y1••••A’X’1X’2XB′P’X/YE′0Y’2CIC’2CIC’1AYY’1Figure

3-4(b)EquilibriumpointsandgainsinautarkyandwithtradeforCountryIIwhenopportunitycostsofproductionareincreasing.PW•••CIC1CIC2YXPW

PW·

·E

B

·0Figure3-5Twopartsofgainsfromtrade:gainsfromconsumptionandgainsfromspecializationCIC3

·

A·TCIC1CIC2CIC3

.AE..B

T.PWPWXY

§2ReciprocalDemandTheory

Acountry’soffercurve提供曲线

Itindicatesthequantityofimportsandexportsthecountryiswillingtobuyandsellonworldmarketsatallpossiblerelativeprices.Itshowsthecountry’swillingnesstotradeatvariouspossibletermsoftrade.

Acombinationofthedemandforimportsandthesupplyofexports.FirstverbalizedbyJohnStuartMill,andthenputintographicformbyAlfredMarshallandF.Y.Edgworth.YAY1Y2X1X2

(PX/Y)1CCIC1XB·0

·

Figure3-6(a)Tradetriangleatapossibletermsoftradeof(PX/Y)1A′XX4X3YY3Y4C′B′(PX/Y)2CIC’10Figure3-6(b)Tradetriangleatapossibletermsoftradeof(PX/Y)2·

·

Qx1Qy1Qx2Qy2(PX/Y)1(PX/Y)3(PX/Y)2(PX/Y)4ExportsofgoodX

OCIFigure3-7Alternativetermsoftradeandexport-importcombinationontheoffercurveofCountryIImportsofgoodY0●●●●

E1

E2

M1

M22.TradingEquilibriumOCIIOCI(PX/Y)EorTOTE(PX/Y)1orTOT1

B

A

0E1EeE2M1M2MeI’sexportsofXII’simportsofXFigure3-8TradingequilibriumbetweenCountryIandCountryII

EI’simportsofYII’sexportsofY•••3.Measurementoftermsoftrade

TOT：Thepriceofexportsdividedbythepriceofimports.

Pricetermsoftrade,netbartertermsoftrade

Inpreviousexample,CountryI’sTOT:PX/YCountryII’sTOT:PY/XEconomicinterpretationoftheTOT:Asthepriceofexportsrisesrelativetothepriceofimports,

eachunitofacountry’sexportsisabletopurchasealargerquantityofimports.

Sinceacountryexportsandimportsmanygoods,a

priceindex

foragivenyearmustthereforebecalculated.Thusthetermsoftradeofaparticularcountryinagivenyear

aretheratioofthecountry's

exportpriceindex

toits

importpriceindex

inthegivenyear(usuallymultipliedby100).

IftheTOTinagivenyear>100,thentheTOTisimproved.IftheTOTinagivenyear<100,thentheTOTisdeteriorated.Example(China):In1994:PX=100,PM=100,TOT1994=100In2002:PX=89,PM=141,TOT2002=(PX/PM)×100=63.12Thefigure63.12meansthateachunitofChina’sexportsin2002exchangedfor36.88percentfewerunitsofimportsthaninthebaseyear.

(Raul)Prebisch/Singerfindings

劳尔·普雷維什/汉斯•辛格

ConcernaboutdeteriorationofTOTindevelopingcountries

Studiespublishedin1950bytheArgentineeconomistRaulPrebischandtheBritisheconomistHansSingersuggestedthatthereisatendencyforthepricesofagriculturalproductstofallrelativetothepricesofmanufacturedgoods;turningthe

TOTagainstthedevelopingcountries.Suggest:

nurturetheirown“infantindustries”

andsoreducetheirneedtoexportagriculturalproducts.

HansSinger(1910–2006)

RaulPrebisch（1901-1986）

Factorproportionstheory

orHeckscher-OhlintheoremRaisedcapitaltothesamelevelofimportanceaslabor.SwedisheconomistEliHeckscher(1879-1952)TheEffectofForeignTradeontheDistributionofIncomeHisformergraduatestudentBertilOhlin

(1899-1979)

InterregionalandInternationalTradeIn1979OhlinwasawardedaNobelprizejointlywithJamesMeadeforhisworkininternationaltradetheory.(2008,PaulKrugmannobelprizewinner)§3FactorEndowmentTheoryFactorintensityinproductionXisrelativelylaborintensive,andYisrelativelycapitalintensive.

(L/K)X>(L/K)Y

01234Labor(units)ProductX(4labors,

1capital)Figure3-9DescriptionofGoodXandGoodYbytheirfactorproportionsCapital(units)2

1ProductY(4labors,2capitals)2.Factorendowments,factorprices,andcomparative

advantage

Whatdeterminescostdifferencesiftechnologyis

thesameacrosscountries?Answer:Differentfactorendowments.

“Differentfactorendowmentsreferstodifferentrelativefactorendowments,notdifferentabsoluteamounts”.

Relativefactorendowment(abundance)maybedefinedintwoways:Physicaldefinitionexplainsfactorabundanceintermsofthe

physicalunits

oftwofactorsavailableineachofthetwocountries.CountryIwouldbethecapitalabundantcountryif

(K/L)I＞(K/L)II.Pricedefinition

reliesontherelativepricesofcapitalandlabortodeterminethetypeoffactorabundancecharacterizingthetwocountries.CountryI