Trade Theory

Inframarginal analysis of trade theory: Cheng, Sachs, and Yang (2000a) show that government trade policy regime, equilibrium network size of division of labor, and aggregate productivity are interdependent in a Ricardian model. This paper shows that as transportation efficiency is improved, the general equilibrium discontinuously jumps from autarky to the partial division of labor, where the country producing both goods would impose a tariff and the country producing a single good would prefer unilateral free trade, followed by the complete division of labor where both countries would negotiate on tariff rates to achieve free trade. In a model with three countries, the country which does not have a comparative advantage relative to the other two countries and/or which has low transaction efficiency may be excluded from trade. Cheng, Sachs, and Yang (1999, 2000b) have applied inframarginal analysis to the HO model with exogenous technological as well as endowment comparative advantages to obtain similar results. Cheng, Liu, and Yang (2000) and Yang, and Zhang (2000, forthcoming) have applied inframarginal analysis to models with endogenous as well exogenous comparative advantages to study interplays between trade policy regime, dual structure, income distribution, and network size of division of labor. Sachs, Yang, and Zhang (forthcoming) have applied inframarginal analysis to the Dixit-Krugman models to explain discontinuous jumps of trade pattern by interplays among endogenous and exogenous comparative advantages in technology, endowments, and transaction efficiencies. D. Yang (2001) and G. Li (2001) have applied inframarginal analysis to investigate the relationship between international trade, foreign direct investment, and network size of division of labor.

Paper collection of trade theory:

1. Wen Li Cheng, Jeffrey Sachs & Xiaokai Yang, A General Equilibrium Re-appraisal of the Stolper-Samuelson Theorem. (trade Theory, general equilibrium HO model, Stolper-Samuelson theorem)
2. Wenli Cheng, Jeffrey Sachs & Xiaokai Yang, An Inframarginal Analysis of the Ricardian Model. (Trade Theory)
3. Jeffrey Sachs, Xiaokai Yang & Dingsheng Zhang, Pattern of Trade and Economic Development in the Model of Monopolistic Competition. (Income distribution, division of labor, dual structure, economic development, trade pattern, monopolistic competition, economies of scale, inframarginal analysis)
4. Xiaokai Yang & Dingsheng Zhang, Economic Development, International Trade, and Income Distribution. (Income distribution, division of labor, dual structure, economic development)
5. Wenli Cheng, Jeffrey Sachs & Xiaokai Yang, An Inframarginal Analysis of the Heckscher-Ohlin Model with Transaction Costs and Technological Comparative Advantage. (H-O theorem, factor equalization theorem, Stolper-Samuelson theorem, Rybczynski theorem)
6. Jeffrey Sachs, Xiaokai Yang, Dingsheng Zhang, Globalization, Dual Economy, and Economic Development.
7. Xiaokai Yang & Yongsheng Zhang, Tests of Scale Effects Predicted by the Dixit-Stiglitz Model. (Scale effect, Firm Size, the Dixit-Stiglitz Model)
8. Wenli Cheng, Meng-chun Liu & Xiaokai Yang, "A Ricardian Model with Endogenous Comparative Advantage and Endogenous Trade Policy Regimes".

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