India in the Global and Regional Trade: Determinants of Aggregate and Bilateral Trade Flows and Firms’ Decision to Export
نویسندگان
چکیده
T.N. Srinivasan and Vani Archana INTRODUCTION The standard models of international trade such as the Ricardian, Hecksher-OhlinSamulelson (HOS) and specific factor models focus on explaining the commodity patterns of trade between countries and their determinants primarily comparative advantage. Constant returns to scale in production are assumed to prevail so that the structure of production in terms of firms is of no consequence. Further the pattern of trade is determined by comparative advantage, which in turn, is driven by differences in relative factor endowments in the HOS model. Thus for two countries to trade, their relative factor endowments have to differ, and the pattern of trade is inter-sectoral so that each country either exports or imports and not both, each commodity. The empirical literature on international trade for decades after the Second World War focused on basically two tasks. The first was testing predictions of Ricardian and HecksherOhlin theories on patterns of intersectoral trade and explaining departures from the predictions while still remaining within their framework. For example, early studies of Leontief showed that the United States exported labour intensive commodities contrary to the prediction that as a capital-rich country would export capital intensive commodities. An explanation for this deviation was that adjusting for the higher skills of US workers, US in fact was a labour-rich country. The second task, of which the gravity model is the prime example, was to explain bilateral trade flows. The observed pattern of trade, even at the most disaggregated level, however, showed significant intra-industry trade so that countries appear to export as well as import the same
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Discussion on: “India in the Global and Regional Trade – Determinants of Aggregate and Bilateral Trade Flows and Firms’ Decision to Export”
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