International Trade and Volume Patterns under Quasilinear Preferences

Elias Dinopoulos · Kenji Fujiwara · Koji Shimomura

11 citations0/0 files storedReview of Development Economics

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Global trade and economics Economic Theory and Policy Global Trade and Competitiveness

Abstract

Abstract We formally analyze the pattern and volume of trade by embedding quasilinear preferences in the standard perfectly competitive, two‐factor, two‐good, two‐country trade model. Quasilinear preferences deliver a natural partition of the two goods into a luxury and a necessity, and preserve the validity of the Heckscher–Ohlin and Heckscher–Ohlin–Vanek theorems. In addition, the predicted factor content of trade under quasilinear preferences is smaller (larger) than the predicted factor content of trade under homothetic preferences if and only if the luxury good is capital (labor) intensive. This result offers a novel explanation for the “missing‐trade” mystery.

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1980Economics and Consumer Behavior 1992Protection For Sale 2005Market Size, Trade, and Productivity 2004Advanced International Trade : Theory and Evidence Ed. 2 2004Advanced international trade: theory and evidence 2002Agglomeration and Trade Revisited*1995The Case of the Missing Trade and Other Mysteries 1993International Factor Price Differences: Leontief was Right!

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