International Economics - Master HDFS · International Economics Lecture2. Silvia Nenci Outline I PART: The RicardianModel: a summing up ... Book: Feenstra/Taylor, 2011 , International

Silvia Nenci

Master in Human Development and Food Security

2014-2015

Dr. Silvia Nenci

University of Roma Tre

[email protected]

International Economics

Lecture 2

Silvia Nenci

Outline

I PART:

� The Ricardian Model: a summing up

� In class problems

� The Heckscher-Ohlin Model

II PART:

� New players: the Emerging Economies

Silvia Nenci

The Ricardian model

� It focuses on technology differences across countries

as an explanation for trade.

� It explains the concept of comparative advantage

and why it works as an explanation for trade

patterns.

Book: Feenstra/Taylor, 2011 , International Trade,Worth Publishers

Silvia Nenci

KEY POINTS of the Ricardian Model

1. the pattern of trade is determined by comparative

advantage.

• A country has comparative advantage in producing a good

when the country’s opportunity cost of producing the good

is lower than the opportunity cost of producing the good in

another country.

• Even countries with poor technologies can export the goods

in which they have comparative advantage

2. There are gains from trade for both countries.

• By exporting the good in which a country has the lowest

opportunity cost, the country could benefit from

participating in international trade (i.e. more consumption)


Silvia Nenci

I N - C L A S S P R O B L E M S

1. What determines the pattern of international trade

between two countries in the Ricardian model?

Answer: The pattern of trade is determined by

comparative advantage. The country with a comparative

advantage in the production of a product

will export the good.

Silvia Nenci


2. Why is the production possibilities frontier a

straight line in the Ricardian model?

Answer: The production possibilities frontier is a

straight line in the Ricardian model because of the

assumption that the marginal products of labor are

constant. In the Ricardian model there are no

diminishing returns.

Silvia Nenci


What is the opportunity cost of 1 unit of telephones in

terms of radios in Taiwan? In Vietnam?

3. What are the absolute advantages?

Taiwan has an absolute advantage in the production of

both telephones and radios.

Silvia Nenci

I N - C L A S S P R O B L E M SAnswers:

4. Vietnam has a comparative advantage in the production of

telephones. True or false?

TRUE: Vietnam has a lower opportunity cost of producing

telephones relative to Taiwan.

Silvia Nenci

I N - C L A S S P R O B L E M S5. If the two countries engage in international trade, what will

Taiwan produce?

Because Vietnam has the lower opportunity cost in the production

of telephones and hence comparative advantage in producing

this good, Taiwan has a comparative advantage in the production of

radios. Thus, Taiwan will specialize in the production of radios

Silvia Nenci

The Heckscher-Ohlin Model

Silvia Nenci

Why countries trade

An overview of trade theories:

Silvia Nenci

The Heckscher-Ohlin Model

� The Heckscher-Ohlin model assumes that trade occurs because

countries have different resources.

� The HO model is a long-run model because all factors of production

can move between the industries.

� The model investigates also how the opening of trade between the

two countries affects the payments to labor and to capital in each of

them

Silvia Nenci

Heckscher-Ohlin Model


• The model was developed in 1919 by two Swedish

economists, Eli Heckscher and Bertil Ohlin

• To explain the “golden age” of international trade

between 1890 and 1914, during which there was an

increase in the ratio of trade to gross domestic product

(GDP)

• This increase of the amount of international trade

coincided with improvements in transportation

(steamship and railroad).

• They assumed the same technologies across countries

and uneven distribution of resources to explain trade

Silvia Nenci

Examples of international trade driven by

different resources


• Canada has a large amount of land and therefore exports

agricultural and forestry products as well as petroleum

• US, Western Europe and Japan have many highly skilled

workers and much capital and export sophisticated

services and manufactured goods

• China and other Asian countries have a large number of

workers and moderate but growing amounts of capital

and export less sophisticated manufactured goods

Silvia Nenci



Basic assumptions:

• 2 countries: Home and Foreign

• 2 goods: computers and shoes

• 2 factors of production: labor and capital

The total amount of capital (K) in an economy is given by the sum of the

capital used in shoes KS and computers KC.

The total available labor (L) in the economy is equal to the labor used in

shoes LS and computers LC.

The 6 assumptions of the Heckscher-Ohlin model are as follows:

Assumption 1: the two factors of production, labor and capital, can move

freely between the industries.

Assumption 2: Shoes production is labor-intensive; that is, it requires

more labor per unit of capital to produce shoes than computers, so that

LS /KS > LC /KC.

Silvia Nenci


� Assumption 3: Foreign is labor-abundant, by which we mean that the labor–

capital ratio in Foreign exceeds that in Home, L*/K*> L/K.

� Equivalently, Home is capital-abundant, so that K/L >K*/L* (i.e. resources

differ across countries).

• Why?

• Geographic size, populations, immigration/emigration, different stage of

development, etc.)

� Assumption 4: The final outputs, shoes and computers, can be traded freely

(i.e., without any restrictions) between nations, but labor and capital do not

move between countries.

� Assumption 5: The technologies used to produce the two goods are identical

across the countries (the opposite of that in the Ricardian model). A very

unrealistic assumption!

� Assumption 6: Consumer tastes are the same across countries, and

preferences for computers and shoes do not vary with a country’s level of

income. A very unrealistic assumption!Book: Feenstra/Taylor, 2011 , International Trade,Worth Publishers

No-Trade EquilibriumProduction Possibilities Frontiers, Indifference Curves, and

No-Trade Equilibrium Price

FIGURE 4-2 (1 of 3)

The Home production possibilities

frontier (PPF) is shown in panel (a),

and the Foreign PPF is shown in

panel (b).

Because Home is capital abundant and computers are

capital intensive, the Home

PPF is skewed toward computers.


No-Trade Equilibria in Home and Foreign




FIGURE 4-2 (2 of 3)

Home preferences are summarized

by the indifference curve, U.

The Home no-trade (or autarky)

equilibrium is at point A.

The flat slope indicates a low

relative price of computers,

(PC /PS)A.


No-Trade Equilibria in Home and Foreign (continued)




FIGURE 4-2 (3 of 3)

No-Trade Equilibria in Home and Foreign (continued)

Foreign is labor-abundant and shoes are labor- intensive, so the Foreign PPF is

skewed toward shoes.

Foreign preferences are summarized by the indifference curve, U*

The Foreign no-trade equilibrium is atpoint A*, with a higher relative price

of computers, as indicated by the steeper slope of (P*C /P*S)A*.



A higher relative price of computers

Free-Trade EquilibriumHome Equilibrium with Free Trade

FIGURE 4-3 (1 of 2)

At the free-trade world relative price of

computers, (PC /PS)W,

Home produces at point B in panel (a) and

consumes at point C,

exporting computers and importing shoes.

Point A is the no-trade equilibrium.

The “trade triangle” has a base equal to

the Home exports of computers (the

difference between the amount produced

and the amount consumed with trade,

(QC2 − QC3).

International Free-Trade Equilibrium at Home



Free-Trade EquilibriumHome Equilibrium with Free Trade

FIGURE 4-3 (2 of 2)

The height of this triangle is the Home

imports of shoes (the difference between

the amount consumed of shoes and the

amount produced with trade, QS3 − QS2).

.

International Free-Trade Equilibrium at Home (continued)



Free-Trade EquilibriumForeign Equilibrium with Free Trade

FIGURE 4-4 (1 of 2)

At the free-trade world relative price of

computers, (PC /PS)W,

Foreign produces at point B* in panel (a) and

consumes at point C*,

importing computers and exporting shoes.

Point A* is the no-trade equilibrium.)

The “trade triangle” has a base equal to

Foreign imports of computers (the

difference between the consumption of

computers and the amount produced with

trade, (Q*C3 − Q*C2).


International Free-Trade Equilibrium in Foreign


Free-Trade EquilibriumForeign Equilibrium with Free Trade

FIGURE 4-4 (2 of 2)

The height of this triangle is Foreign

exports of shoes (the difference

between the production of shoes and

the amount consumed with trade, Q*S2

– Q*S3).

.


International Free-Trade Equilibrium in Foreign (continued)


Free-Trade Equilibrium

Pattern of Trade

• Home exports computers, the good that uses

intensively the factor of production (capital) found in

abundance at Home.

• Foreign exports shoes, the good that uses intensively

the factor of production (labor) found in abundance

there.

• This important result is called the Heckscher-Ohlin

theorem.



Silvia Nenci

1. In the Heckscher-Ohlin model countries trade because the

available resources (labor, capital, and land) differ across

countries.

2. In the Heckscher-Ohlin model, we assume that the technologies

are the same across countries

3. The Heckscher-Ohlin model is a long-run framework, so labor,

capital, and other resources can move freely between the

industries

4. Patterns of trade: With two goods, two factors, and two

countries, the Heckscher-Ohlin model predicts that a country will

export the good that uses its abundant factor intensively and

import the other good.

K e y T e r m KEY POINTS of the Heckscher-Ohlin model

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The Emerging Economies

Silvia Nenci

International Trade and Economic Integration: the case of Emerging countries

We look at:

1. Gains from trade & economic integration (with a focus on DCs):

what the theory sais, what the evidence finds

2. Economic characteristics of DCs and EEs

• Facts and figures

3. Main channels of EEs global impact:

• Growth and global production networks

• Trade flows and trade patterns

• Investment

• Governance

4. Key questions and implications

Silvia Nenci

Gains from trade: the theory -1

What is meant by the “gains from trade”?

Two kinds of gains:

1. static gains

2. dynamic gains

Silvia Nenci

Gains from trade: the theory -2

Static gains: the gains from the reallocation of factors of

production in sectors where the country has a comparative

advantage. As producers and consumers allocate resources

most efficiently + consumption, + production

Dynamic gains: the gains that accrue over time from a higher

productivity of production factors and a higher total factor

productivity.

� Firms or industry take advantage of economies of scale.

� More competition and opportunities for innovation (technological

spillovers, learning-by-doing, learning-by importing and learning by

exporting)

� Pro-competitive effects (rationalization of production costs,

reduction in technical inefficiency).

Silvia Nenci

Is trade good? Yes, but….

� Not only gains…

� Trade is predicted to benefit countries as a whole in several ways, but trade may harm particular groups within a country:

• It may have effects on the distribution of income within a country

• It can adversely affect the owners of resources that are used intensively in industries that compete with imports

Silvia Nenci

Gains to DCs from trade liberalization are often

exaggerated

� According to standard economic models, removal of

all of the rich countries' barriers to the merchandise

exports of DCs would result in very little additional

income for the exporting countries

Trade, trade liberalization & DCs: the

empirical evidence

Silvia Nenci

KEY ISSUE: THE GLOBAL IMPACT OF MULTILATERAL TRADE POLICY ON DCs- MACRO EFFECTS: Income effects

WHAT WE KNOW REFERENCES QUANTIFICATION ASSUMPTIONS

A remarkable number of empirical works

focused on the effects of various multilateral

round negotiations on DCs' income, where

DCs are taken as a group both at regional and

global level.

These works did not achieve a common stand

on the issue.

Most of the earlier studies (based on UR)

present overall positive effects on income

OECD (1993), Goldin, Knudsen, and van der

Mensbrugghe (1993), Francois, McDonald and

Nordstrom (1994), World Bank/OECD (1993), Stoekel

(1990), Peterson (1992), DRI (1993), Nguyen, Peroni and

Wigle (1993)

On average, the earlier studies

estimate an increase from 1% up to

5% of world income (smaller for DCs)

Recent studies (mainly focused on DDA

projetions) are more cautious about the

estimated DCs' gains from trade liberalization.

This is partially due to: an improving of the

econometric models that better specifies

country characteristics; more detailed trade

policies considered in the analysis; updated

data sets; less protectionism left to lose

Yang (1994), Francois, McDonald, Nordström (1995),

Harrison, Rutherford, Tarr (1996), Goldin and van der

Mennsbrugghe (1996), Hertel, Martin, Yangashima, and

Dimaran (1996), Brown, Deardorff, Fox, and Stern

(1996), Laird and Safadi (1996); Whalley (2000); Hertel

and Martin (2000); Hoekman et al. (2003); Dimaranan,

Hertel and Keeney (2003); Francois, van Meijl and van

Tongeren (2003); Stiglitz and Charlton (2004); Hertel and

Winters (2005); Hertel and Keeney (2005); Ackerman,

(2005); Polaski S. (2006); IFPRI (2006)

Recent studies estimate an increase of

less than 1% of world income together

with extremely limited effects on

poverty alleviation. Contradictory

outcomes for DCs.

1. Focus on those elements more easily

quantifiable (tariff cuts, agriculture,

textiles) rather than on elements harder

to quantify (dispute settlement, TRIMs,

TRIPs).

2. They typically assume perfect

competition and constant returns to

scale.

3. They follow fairly conventional

literature

4. Basically static analysis (growth

impacts are evaluated by comparing

regional income before and after

liberalization);

Silvia Nenci

LATEST STUDIES

Hertel and Keeney (2005) 84 billions of dollars (of which 22 of DCs); 0.3% of

world GDP

CGE-GTAP 6 database. Liberalization measures: removing of import

market access; export subsidies; domestic support.

Anderson et al. 2005a by $290 to $460 billion, with higher percentage

gains for developing countries (0.8 to 2.0 percent)

CGE-LINKAGE model (with dynamic features)

Polaski S. (2006) a one-time increase in world income of $40 to $60

billion (increase of less than 0.2 percent of current

global GDP) with plausible Doha scenarios

Applied general equilibrium (AGE) model of global trade (the

Carnegie model); comparative static gains; a multicountry, multi-

sector general equilibrium model; innovations: a) labor is

disaggregated into three types (agricultural labor, urban unskilled

labor, and urban skilled labor); b) existence of unemployment of urban

unskilled labor in developing countries. IFPRI(2006) increase of 1,04% of GDP for HICountries; 0,6%

for Meaddle income countries; 1,6% for Low

income countries (strong trade liberalization

scenario)

MIRAGE -CGE model (the CEPII model); multi-sector, multi-region

model with a sequential dynamic recursive set-up; perfect competition

is assumed in all sectors.

Global impact: No common stand.

Weak gains from trade liberalization, even lower in the most recent

studies

Trade, trade liberalization & DCs: the

empirical evidence -3

Silvia Nenci

DCs’Liberalization Costs

� Loss of government revenue from reducing trade barriers

� Adjusting cost because the opening of protected markets

(domestic reforms)

� Implementation costs linked to WTO commitments

� Shock risks because of international openness

Silvia Nenci

Global integration of DCs

In the last few decades developing countries have

experienced increasing involvement in the global

markets…..

Silvia Nenci

(per capita GDP growth rate, per cent)

The shift of growth to Developingcountries

0,0

0,5

1,0

1,5

2,0

2,5

3,0

3,5

4,0

4,5

5,0

1960s 1970s 1980s 1990s 2000-2004

Industrialized economies Developing economies

Source: World Bank, WDI 2006

Silvia Nenci

The DCs’ importance on World TradeChart 2: Development of merchandise exports and imports volume, 1990-2008

(Indices, 1990=100)

100

200

300

400

500

1990 91 92 93 94 95 96 97 98 99 2000 01 02 03 04 05 06 07 2008

Developing economies-exports Developing economies-imports

Developed economies-exports Developed economies-imports

Developing economies

Developed economies

Silvia Nenci

Developing country exports

have shifted toward manufactures

0

20

40

60

80

Agriculture

Minerals

Manufactures

1965 1970 1975 1980 1985 1990 1995

Percent

Source: Dollar, 2006

Today, 80% of developing country merchandise

exports are manufactures. Much of that

manufacturing trade is linked to FDI and to

participation in global production networks

Silvia Nenci

Foreign direct investments - FDI(mld $): the

new role of DCs

Silvia Nenci

*FDI definitionA cross-border investment by a resident entity in one economy

with the objective of obtaining a lasting interest in an

enterprise resident in another economy.

• The lasting interest implies the existence of a long-term

relationship between the direct investor and the

enterprise and a significant degree of influence by the

direct investor on the management of the enterprise

• Ownership of at least 10% of the voting power,

representing the influence by the investor, is the basic

criterion used.

Different from a Portfolio investment: investment made by an

investor who is not particularly interested in involvement in

the management of a company. The purpose of the

investment is solely financial gain.

Silvia NenciSource: WTO, March 2013

DCs’ increasing participation in the global

governanceThe World Trade Organization (WTO) example: WTO is the international

organization whose primary purpose is to open trade for the benefit of all.

It provides a forum for negotiating agreements aimed at reducing obstacles to

international trade and ensuring a level playing field for all

160 members - about 2/3 are DCs

Silvia Nenci

The EMERGING ECONOMIES (EEs)

Within the developing world the rise of the Emerging

Economies (EEs) – China, India, Brazil, and South Africa

CIBS or BRICS with Russia– as both economic and

political actors,

is attracting interest and having significant and far-

reaching impact…

Interest by Media

Silvia Nenci

Interest by Academia

Growing amount of studies devoted to the analysis ofthe impact of the EEs on the global economy:

• Rodrik, 2006; Whalley, 2006; Bussolo et al., 2007; Winters

and Yusuf, 2007; Kaplinsky and Messner, 2008; Gu et al.,

2008; McDonald et al., 2008; Qureshi and Wan, 2008;

Nenci, 2008; Hsieh and Klenow, 2009; OECD, 2009; Santos-

Paulino and Wan, 2010, Amiti and Freund, 2010; Whalley

and Medianu, 2010; Harrigan and Deng, 2010; Feenstra and

Wei, 2010; Amann, 2011; Wang and Whalley, 2011; Wang

et al., 2011; Harris et al., 2011; Hanson, 2012; Montalbano

and Nenci, 2014.

Silvia Nenci

The BRICS economies

� The BRIC (Brazil, Russia, India and China) acronym:

Goldman Sachs in 2001

� BRICS* economies:

- represent almost 3 billion people (about 40% of world

population)

- account for more than a quarter of the world's land

- have a nominal GDP of US$14.9 trillion (approximately 10%

of world GDP)

- have an estimated US$4 trillion in combined foreign

reserves

� Now BRIC is a symbol of the shift in global economic power

but also the title of the formal association

Silvia Nenci

New global players

Thanks to their economic growth and size EEs have

emerged as important powers.

They have acquired leadership roles thanks to their

ability to formulate policy, articulate the views held by

broad groups of DCs (in WTO, WB, IMF, G20, etc.).

Consequently, the world economy is undergoing a

process of rapid change

Silvia Nenci

Which impacts and channels?

Various channels are taken into consideration to

assess the impact of Emerging economies

dynamism.

Although EEs have very different economic

structures, their performance might affect the

world economy mainly through 4 channels:

- global production;

- trade flows;

- investment flows;

- global and regional governance.

Silvia Nenci

PRODUCTION: Weight of EEs and projections

PRODUCTION: Share of single EEs on global

production

Source: IMF, World Economic Outlook, 2010

ICs 68%

DCs 32%

Silvia Nenci

Growth under

the crisis

Source: IMF, WEO 2014

Silvia Nenci

CIBS as a group shares an impressive trend. They are currently

the leading exporters and importers – both

in merchandise and services – in their respective regions

TRADE: CIBS’ weight in world trade, 2011

Countries Exports Imports Exports Imports

China 2 3 10.4 9.5 4 3 4.4 6.0

Brazil 16 15 1.4 1.3 18 10 0.9 1.9

India 13 8 1.7 2.5 5 5 3.3 3.1

South Africa 28 22 0.5 0.6 27 27 0.3 0.5

European Union 1 1 14.9 16.2 1 1 24.7 21.1

USA 3 2 8.1 12.3 2 2 13.9 10.0

*Excluding intra-EU trade

Source: World Trade Organization, 2013

Merchandise Commercial services

Rank in world trade* Rank in world trade*Share in world

total exports

Share in world

total imports

Share in world

total exports

Share in world

total imports

Silvia Nenci

INVESTMENT:

Global FDI inflows, top 20 host economies(Billions of dollars)

The changing

pattern of FDI

inflows is

confirmed also

in the global

ranking of the

largest FDI

recipients:

in 2010, half of

the top 20 host

economies were

from developing

and transition

economies

Silvia NenciFonte: UNCTAD, on-line database (2004)

INVESTMENT: FDI outflows from DCs

Silvia Nenci

GOVERNANCE: Regional Trade Agreements

(RTAs) involving CIBS

Country Notified RTAs in force Announced RTAs Total RTAs

Brazil 5 - 5

China 10 2 12

India 14 5 19

South Africa 4 1 5

Total 33 8 41

Source: WTO RTA database, August 2010

*Regional Trading Agreement (RTA), Regional Integration Agreement (RIA), or Preferential

Trading Agreements (PTA) ⇒ generic terms (often used interchangeably) to describe the

process of economic integration

Regional Economic Integration: agreements between groups of countries in a geographic

region to reduce, and ultimately remove, tariff and nontariff barriers to the free flow of

goods, services, and factors of production between each other.

Silvia Nenci

CO2 Emissions by Region

Notes: *World includes international aviation and international marine bunkers, which are shown together as Bunkers. **Calculated

using the IEA’s energy balances and the Revised 1996 IPCC Guidelines. CO2 emissions are from fuel combustion only. ***Asia

excludes China.

Silvia Nenci

Other impacts: SOCIAL CHANGES

Silvia NenciSource. The Coca Cola Company

Other impacts: CONSUMPTION

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Key questions and implications

Silvia Nenci

Some key questions and implications

1. TRADE:

• Who are likely to be the losers and winners

(complementary or competitive effects for trade

partners)?

• Are EEs a threat for Advanced Countries?

2. GROWTH:

• Are EEs engine for growth?

3. GOVERNANCE:

• Is a new global order developing?

Silvia Nenci

Who are likely to be the losers and winners?

EEs’ performance and trade expansion can affect differentially

other developing countries and developed countries too.

Their specialization can generate, in some cases, complementary

effects, in other cases competitive effects.

EEs can be seen as:

- competitors for those economies that have similar comparative

advantages in the same products and/or services.

- driving forces for those economies that have complementary

production and trade structures, because producers can benefit

from the demand for their output from CIBS and they can be

included in regional value chains.

Silvia Nenci

CIBS Trade Dinamism: Trade Specialization 1996-98

Source: Montalbano, Nenci 2010

Leamer (1984; 1995)

10 ind.l clusters:

• 2 raw materials (petroleum and raw

materials)

• 4 crops (forest, animal, trop.agr., cereals)

• 4 manufactures (lab-int., cap.int., machinery,

chemicals)

Silvia Nenci

-1

-0,8

-0,6

-0,4

-0,2

0

0,2

0,4

0,6

0,8

PETRO

MAT

FOR

TROP

ANL

CER

LAB

CAP

MACH

CHEM

CIBS Trade Specialization (RSCA average values 2006-2008)

CHINA 06-08 CHN

INDIA 06-08 IND

South Africa ZAF

BRAZIL 06-08 BRA

CIBS Trade Dynamism: Trade Specialization 2006-08

62

Source: Montalbano, Nenci 2010

The specialization of trade

has evolved

Silvia Nenci

CIBS’ main competitors (for the top five exports of each country, 2006-2008)

1 Electrical, electronic equipment USA Japan Germany Korea Mexico Malaysia

2 Boilers, machinery; nuclear reactors, etc Germany USA Japan Korea Mexico Malaysia

3 Articles of apparel, accessories, knit or crochet Italy Germany France Turkey Bangladesh India

4 Articles of apparel, accessories, not knit or crochet Italy Germany France Bangladesh India Turkey

5 Iron and steel Germany Japan Belgium Russian Fed. Ukraine Korea

1 Mineral fuels, oils, distillation products, etc Canada Norway USA Russian Fed. Saudi Arabia UAE

2 Pearls, precious stones, metals, coins, etc USA UK Israel UAE South Africa China

3 Organic chemicals USA Germany Belgium China Korea Saudi Arabia

4 Iron and steel Germany Japan Belgium China Russian Fed. Ukraine

5 Boilers, machinery; nuclear reactors, etc Germany USA Japan China Korea Mexico


2 Ores, slag and ash Australia USA Canada Chile Peru South Africa

3 Vehicles other than railway, tramway Germany Japan USA Korea Mexico China



1 Pearls, precious stones, metals, coins, etc USA UK Israel UAE India China



4 Vehicles other than railway, tramway Germany Japan USA Korea Mexico China


Source: Author's elaboration on UN-Comtrade data

Legend : Hong Kong and Taipei are not taken into consideration as competitors for China.

South Africa

Product Top 3 Advanced Countries Top 3 Developing Countries

China

Brazil

IndiaBoth developed and developing countries seem to be affected by CIBC competition

Are EEs engine for growth?

1

Innovation in emerging economies is likely to take off as

income levels riseSources: Global Development Horizons 2011, based on IMF IFS, World Bank WDI and World

Intellectual Property Organization.

Are EEs engine for growth? -2

� The specialization of trade has evolved significantly

(mainly in China ).

� China, India and Brazil have become increasingly engaged in

sophisticated and technology-intensive production and

trade, shifting from labour to capital-intensive

commodities, and enjoying rapid productivity gains across

all manufacturing activities

Silvia Nenci

Is a new global order developing?

• EEs have acquired leadership roles at international

level (WTO, G20, WB, etc.)

• Multinationals from emerging markets will be

increasingly important sources and drivers of global

investment flows

• The international monetary system will move toward

a multi-currency regime

• A new global economic order is unfolding as the

balance of global growth shifts from developed to

emerging economies

Silvia Nenci

Summary -1

EEs have registered an extraordinary economic

performance that has affected global economy mainly

through these channels:

• Production

• Trade

• Investment

• Governance

They have acquired leading roles at the international

level in key institutions and contexts.

Silvia Nenci

Summary -2

In terms of growth/production: they (or some) can

be considered engines for growth thanks to the

gradual shift from labour to capital intensive sectors

in the production and trade

In terms of trade: they can be seen as competitors

or driving forces for other economies (it depends on

the specialization pattern)

Now many issues to be faced

Silvia Nenci

Conclusions

• The postwar global economic structure –defined by the

dominant position of advanced countries –is in the midst

of a fundamental change

• Rapid globalization and expected higher growth rates in

emerging market economies will translate into greater

economic influence for developing countries

• The move to multipolarity will be by and large positive

for developing countries, but the transition needs to be

managed!

Silvia Nenci

References List• Hanson, G. H., 2012, “The Rise of Middle Kingdoms: Emerging Economies in Global

Trade", Journal of Economic Perspectives, 26(2), 41-64.

• Montalbano P. e Nenci S., 2014, “The Trade Competitiveness of Southern Emerging

Economies: A Multidimensional Approach Through Cluster Analysis”, in World Economy,

37: 783–810;

• Montalbano, P. and S. Nenci, 2012, "The Trade Specialization of CIBS: A Threat to

Whom?", The International Trade Journal, 26, 5.

• Nayyar, D. , 2009, “China, India, Brazil and South Africa in the World Economy: Engines of

Growth?”, in A. U. Santos-Paulino, and G., Wan (eds.) Southern Engines of Global Growth.

Oxford: Oxford University Press.

• Nenci, S., 2008, “The Rise of the Southern Economies: Implications for the WTO-

Multilateral Trading System”, WIDER Research Paper No. 10.

• Qureshi, M.S. and G. Wan, 2008, “Trade Expansion of China and India: Threat or

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International Economics - Master HDFS · International Economics Lecture2. Silvia Nenci Outline I PART: The RicardianModel: a summing up ... Book: Feenstra/Taylor, 2011 , International