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Rybczynski's Diagram and the Stolper/Samuelson Theorem
| Content Provider | Semantic Scholar |
|---|---|
| Author | Jones, Ronald Winthrop |
| Copyright Year | 2009 |
| Abstract | In his famous 1955 article, Rybczynski used the familiar production box diagram in order to prove, correctly, the theorem that bears his name. However, the construction he used also suggests that the dual theorem, the Stolper–Samuelson theorem, is incorrect. The problem is that the isoquants in the box diagram were not homothetic to such a degree as to yield false Stolper–Samuelson results. Any graduate course (as well as many undergraduate courses) in international trade theory introduces students to T.M. Rybczynski’s famous result contained in his 1955 chapter in Economica. This result drew attention to a strong asymmetry facing small growing countries that are competitively involved in international trade: If world prices of a pair of commodities are constant and a country experiences growth in one of a pair of factors of production, national output and income increase, but whereas the output of one commodity expands, that of the other actually contracts. (This is a necessary result when production is characterized by constant returns to scale and no joint production.) Rybczynski’s own proof of this theorem that bears his name was geometric, based on a box diagram that is faithfully reproduced later. His geometric proof is absolutely correct. Algebraic proofs are easily derived, and the economic intuition is simple: In the standard Heckscher–Ohlin 2× 2 model, commodity prices determine factor prices and, thus, factor proportions. If commodity prices remain constant, so do techniques, and if, say, the supply of capital expands, so will the output of the relatively capital-intensive commodity. However, with given techniques the output of the capital-intensive commodity cannot expand without its using more labor, and the only source of labor in a full-employment economy is the other, relatively labor-intensive, sector. Hence, its output must fall. 1 I am pleased to have this note included in a volume in remembrance of Koji Shimomura. From my memory of him this note is the kind of thing I believe he would have enjoyed. R.W. Jones University of Rochester, Rochester, NY 14627, USA, e-mail: rjones@mail. Rochester.edu T. Kamihigashi and L. Zhao (eds.) International Trade and Economic Dynamics – Essays in Memory of Koji Shimomura. c 9 © Springer-Verlag Berlin Heidelberg 2009 |
| Starting Page | 9 |
| Ending Page | 12 |
| Page Count | 4 |
| File Format | PDF HTM / HTML |
| DOI | 10.1007/978-3-540-78676-4_3 |
| Alternate Webpage(s) | https://page-one.springer.com/pdf/preview/10.1007/978-3-540-78676-4_3 |
| Alternate Webpage(s) | https://doi.org/10.1007/978-3-540-78676-4_3 |
| Language | English |
| Access Restriction | Open |
| Content Type | Text |
| Resource Type | Article |
