By David Greenaway (eds.)
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Additional resources for Current Issues in International Trade
6 GROWTH, INTERNATIONAL INVESTMENT AND TRANSITIONS To focus on the role of capital goods in trade and in trade theory is, implicitly, to direct attention also to such matters as growth (capital accumulation), international investment and transitions between steady growth paths. While it will not be possible to enter into an adequate discussion of these extensive issues here, it would perhaps be strange to conclude without at least sketching out their connections with our preceding discussion; once those connections are seen, the interested student will be able to pursue matters further.
Wicksell, 1967, p. 149) Ian Steedman and 1. S. Metcalfe 35 To illustrate the above negative conclusions, we may use an example in which there are two consumption commodities (two kinds of 'com'), each producible by means of many alternative types of machine, just as in our earlier section on capital theory. The consumption commodities are tradable but the machines are not. 8, in which k; is the value capital:labour ratio involved, directly and indirectly, in the production of the ith consumption commodity, expressed in terms of the first consumption commodity.
Notice also that if international equilibrium is found to the left of B, p/p 2 will have fallen, with trade, in economy A and thus the wage:rent ratio will have risen; in fact trade will have benefited A's relatively scarce factor (labour), contrary to the usual H-0-S prediction. If A and B have the same positive interest rate, as above, they have the same relationship between pJP 2 and the rent:wage ratio; it is thus not surprising that free trade will equalise rents and wages (with incomplete specialisation) and that the Stolper-Samuelson theorem also holds good.