Essays in international trade with heterogeneous preferences and nontraded goods.

Abstract

The thesis is composed of three essays in international trade. The first essay, titled "International Trade and Comparative Advantage with Heterogeneous Preferences and Non-Identical Factor Ownership", examines the validity of the law of comparative advantage under the assumption of multiple households with heterogeneous preferences and non-identical factor distributions in the standard Hecksher-Ohlin-Samuelson model of international trade. In this model, there exists a possibility of multiple autarky equilibria, some of which are unstable. If there is an unstable autarky equilibrium price between initial autarky and trade equilibrium prices, a comparative advantage paradox will result where the pattern of trade is opposite to what is predicted by autarky prices. The appendix to this essay extends the Stolper-Samuelson theorem to the case of multiple households with different factor ownership by diagrammatically introducing a new concept of factor distribution curve. The second essay, titled "Effects of a Capital Inflow on the Welfare of Other Factors of Production", explores the effects of a foreign capital inflow on the return to domestic factors. After reviewing the existing trade models with and without non-traded goods, the chapter presents a three-good, three-factor model with a non-traded good, the neighborhood production structure, and heterogeneous preferences among factor classes. Under a particular condition, it is possible that an inflow of capital adversely affects labor even if capital is a middle factor and labor is an extreme factor defined in the two traded sectors. The third essay, titled "The Stolper-Samuelson Theorem in the Presence of Non-Traded Goods", examines the Stolper-Samuelson (S-S), theorem in the presence of non-traded goods. After examining the validity of the S-S theorem in the existing trade models with non-traded goods, the chapter introduces a three-good, three-factor model with a non-traded good, homogeneous preferences, and the neighborhood production structure. It is found that the presence of non-traded goods can create a S-S theorem paradox where an improvement of the terms of trade lowers the real return, in terms of at least one good, to the factor that is used intensively in the export sector because of a secondary change in the relative price of non-traded goods.