Transcript Presentation

A clockwork economy
A three-dimensional trade model imbedded in the general
equilibrium theory
Koen Smet – Institute of International
Economics and Development
2nd FIW-Research Conference – International Economics
Structure
• South Africa´s trade structure with the EU and China and its
evolution between 1993-2006.
• New classification measure
• A three dimensional trade model
• Basic structure
• Factor intensity
• A graphical solution
• The endowment triangle
• Triangles of diversification
• Conclusion
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The evolution of the South African
trade structure 1993-2006
45%
40%
35%
30%
25%
20%
15%
10%
5%
0%
1993
1994
1995
1996
1997
1998
1999
Exports to GDP
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2000
2001
Imports to GDP
2002
2003
2004
2005
2006
Dynamic analysis: new approach
Intra-into (2%)
Intra
Brül
industry
Intra-intra (9%)
Intra-out of (6%)
Trade
Date
GL
Inter
Brül
Adv.
Inter-into (+) (8%)
Inter-intra (+) (8%)
Inter
RCA
Inter-out of (+) (8%)
industry
Inter-into (-) (6%)
Inter
Brül
Disadv.
Inter-intra (-) (21%)
Inter-out of (-) (32%)
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Revealed Comparative Advantages
General
Total
Misc
Transportation
Machinery
Metals
Stone
Textiles
Chemicals
Mineral
Vegetable
0%
10%
20%
Advantage 1993 (in %)
30%
40%
50%
Neutral 1993 (in %)
60%
70%
80%
90%
100%
Disadvantage 1993 (in %)
Total
Misc
Transportation
Machinery
Metals
Stone
Textiles
Chemicals
Mineral
Vegetable
0%
10%
20%
Advantage 2006 (in %)
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30%
40%
50%
Neutral 2006 (in %)
60%
70%
80%
90%
Disadvantage 2006 (in %)
100%
Export Flows – Matrix Classification
Technological Classification (Lall 2000: 341)
Resourcebased
Skill Classification
(Edwards 2001: 491)
Capital-intensive
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Lowtechnology
Medium
technology
Metals (basic
industries)
Chemicals and
allied industries
Intermediatecapital-intensive
Foodstuffs
Stone and glass
Labour-intensive
Plastics and
rubbers
Textiles
Metals
(products)
Wood and wood
products
Raw hides,
skins, leather
and furs
Footwear and
headgear
Ultra-labourintensive
Hightechnology
Transportation
Machinery and
electrical
Machinery
and electrical
(electronics)
Results of the empirical analysis
• General findings
• Grubel-Lloyd index
• Trade specialisation between 1993 and 2006
• Trade Flows
• Imports (EU): Medium and high-technology products, whose
production is labour- or capital-intensive
• Imports (China): Labour-intensive, low- and medium-technology
consumer goods
• Exports: Primary resource-based manufactures (cf. mining and
quarrying industries) and low-technology capital-intensive
manufactures
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Theoretical Model - Inspiration
• Literature:
• Samuelson (1953)
• Chipman (1966 / 1969)
• Batra (1970)
• Jones and Scheinkman (1977)
• Chang (1979)
• Takayama (1981)
• Ethier (1984)
BUT: Focus on the mathematical solvability of the model and the
generalisation of the 2x2x2 theorems.
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Theoretical Model - Assumptions
• Basic structure
• Three production factors: L, H and K
• Three industries
• Three countries: South Africa, EU and China
• Further assumptions
• Zero-Profit condition
• Market-Clearing condition
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Theoretical Model – Factor Intensity
• Double bilateral comparison is not applicable
• The ratio of the distributive share of a certain factor within a
specific industry and this factors overall distributive share
z1K
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K1 wK
X 1 p1

wK K
wK K  wL L  wH H
The Endowment Triangle
• Literature
• McKenzie (1955)
• Leamer (1987)
• Jones and Marjit (1991)
• Jones (1992 / 2005)
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Graphical solution – The concept of
the endowment triangle
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Endowment triangle - Application
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Triangles of diversification
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Import and export flows
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Concluding remarks
• During the period 1993-2006 specialisation was the dominant
trend within the South African trade structure.
• The concepts of endowment triangles and of triangles of
diversification allow for the construction of a three-dimensional
Heckscher-Ohlin-Samuelson trade model.
• Further research should concentrate on:
• a discussion of the input-vectors.
• a comparative static analysis between autarky and free trade.
• the empirical justification of educated assumptions.
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