Implications for the Development of Trade Theory (original) (raw)

FDI and International Trade Relations: A Theoretical Approach

The mainstay theory provides arguments for both complementary and substitute links between FDI and international trade. In accordance to that, a number of empirical investigations indicate a replacement of trade flows by FDI, while other studies reveal a complementary effect between the two. The present study models autarky and trade between two countries in a manner that resembles the real world trade patterns. The objective is to provide the theoretical basis upon which one may introduce bilateral FDI flows. The model follows Fujita's et al. (1999) logic which is based on a spatial transformation of the Dixit-Stiglitz approach with monopolistic competition, increasing returns to scale and iceberg-type transport costs. We introduce capital as an additional production factor and assign marginally different capital intensity to each different industry. Letting capital (and/or labor) be mobile provides a framework that incorporates different relations between FDI and trade, at eac...

International Trade with Classical and Contemporary Theories

Over its two hundred-year history, international trade theory witnessed increasing role of knowledge. Following classical theories of Smith (1776), and Ricardo (1817), based solely on labor as an element of cost, neoclassical contributions made it possible to take capital and other production factors into account through the concept of opportunity cost, undermining knowledge. Even the modern trade theories of Heckscher-Ohlin-Samuelson used two-factor models including just labor and capital. As of 1960s, parallel to the debate over Leontief Paradox, new theories of international trade began to cover knowledge and related concepts like skilled labor, technology gap, product cycle, etc. According to theories, how and who can trade with whom, we will try to explain this situation in this study.

Revisiting The International Trade Theories

isara solutions, 2021

This paper provides a comprehensive examination of diverse trade theories that have shaped international trade. The analysis spans traditional theories such as mercantilism, absolute advantage, and comparative advantage, highlighting their significant principles and criticism. Moving beyond classical paradigms, the paper delves into neoclassical theories, emphasizing the role of factor endowments, factor proportions, and the Heckscher-Ohlin model in explaining patterns of trade. The paper further explores modern trade theories, including the New Trade Theory and the Strategic Trade Policy. These perspectives elucidate the role of economies of scale, imperfect competition, and government intervention in shaping trade dynamics. Additionally, the paper discusses the rising relevance of global value chains and their impact on international trade patterns. Incorporating recent developments in economic thought, the analysis extends to theories addressing non-traditional aspects of trade, such as the New Economic Geography and the Gravity Model. These frameworks offer insights into the spatial distribution of economic activities and the gravitational forces influencing trade flows between nations.

LITERATURE REVIEW ON THEORIES OF INTERNATIONAL TRADE AND POLICIES BEHIND MODERN WORLD TRADE

Journal of Indonesian Applied Economics, 2023

The essay aims to critically examine different theories proposed in the literature on international trade. Design/methodology/approach The essay is based on theoretical literature on the theories of international trade and working policies behind modern world trade globally Findings The essay discusses traditional international trade theories, mercantilist patterns, simplified models, new trade theories, strategic trade policies by advanced countries, FDI and technology role, and trade's impact on growth. It also discusses 21st-century theories, advocating for models that incorporate income inequality, political strategies, and real-world factors, and calls for models that incorporate income inequality and other real-world factors. Research limitations/implications The essay deals with only theoretical literature on international trade theories and policies. Findings and interpretation are subject to the theoretical development of international trade Originality/value The essay provided a critical explanation of international trade theories and tried to explain the paradigm shift in the theoretical framework of international trade.

The Universal Model of Theories Determining FDI Revised, with Bitzenis A., in the International Journal of Trade and Global Markets, Vol. 4, Issue 4, 2011

2011

The paper refers to 'a theoretical model' created by Bitzenis , named Universal Model, that incorporates most of the Foreign Direct Investment (FDI) theories. What derives from the literature review is the comprehension of the relativity of each theory; there is no FDI theory that dominates the decision-making process of multinationals (MNEs) regarding FDI. Economists, MNEs and entrepreneurs may have a decisive interest in countries that open their economies aimed at attracting significant FDI inflows as a final goal. The investment opportunities appeared in various countries differ from time to time even in the same country diachronically.

A Survey of the Evolution of International Trade Theories

2020

The purpose of the paper is to give emphasis to the evolution of international trade theories and their application among nations. A review of the literature method was applied to review the evolution of different scholars’ contributions in the area of international trade. Over a period of time, the development in theories of international trade has gone significant changes. While classical and neo-classical trade theories remain valid new trade models have important insights to describe and seem to a better explanation of the present global trade patterns in the dynamic world.

A FORMAL NOTE ON NEW THEORIES OF INTERNATIONAL TRADE AND DEVELOPMENT

Drawing upon the long-run solutions to a number of models in which there are economies of scale and differing degrees of intra-sectoral competition, conditions are found under which an industry's development will spread to further countries and under which the domestic industry should be supported by state intervention. 0 1996 by