Trade Balance, Terms of Trade, and World Equilibrium Prices

Bjarne S. Jensen ()
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Bjarne S. Jensen: University of Southern Denmark (SDU)

Chapter Chapter 24 in The Elements and Dynamic Systems of Economic Growth and Trade Models, 2025, pp 767-821 from Springer

Abstract: Abstract Explicit autarky formulas of comparative advantage (price, cost) for prediction of trade patterns are derived and demonstrated for bilateral trading economies with any CD sector technologies, CD consumer preferences, and any country factor endowment ratios (proportions) of labor and capital. The analysis continues with the derivation and the demonstration of the international general equilibrium solutions, (terms of trade and traded volumes). These closed-form expressions provide a unified framework for all traditional standard trade models. They allow for international differences in country sizes, endowments, technologies and preferences, encompassing the major “pure trade theories” within a systematic analytic and historical perspective. In this unified framework, we derive the general existence conditions for the solutions under diversification and incipient country specialization.

Keywords: Two-sector two-factor two-country ( 2 × 2 × 2 $$2 \times 2 \times 2$$ ) free trade models; Trade balances and world equilibrium prices; Offer Curves; Explicit (parametric) terms of trade formulas; Free trade and diversification conditions (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-3-031-52493-6_24

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DOI: 10.1007/978-3-031-52493-6_24

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