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ATHENA VRIJDAG Flashcards

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1
Q

The Hecksher-Ohlin Theory
builds on ….?

A
  • comparative advantage
  • FEWER simplifying assumptions
  • CA arises from differences in national factor endowments (land, capital, labor)
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2
Q

are endowment absolute or relative

A

relative (compared to other countries)

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3
Q

for the heckscher olin theory what is said about technologies

A

are the same

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4
Q

for which theory is the assumption that technologies are the same?

A

the heckscher olin theory

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5
Q

the leontif paradox

A
  • following the HO theory
  • US should export capital intensive goods, but in reality they do not (GOES AGAINST THIS THEORY)
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6
Q

therefore the leontif paradox must be controlled for

A

technological and productivity differences

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7
Q

the product life cycle phases

A

introduction, growth, maturity, decline

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8
Q

the product life cycle
- based on …

A
  • based on OBSERVATION
  • new products are made and sold in the US and later the production will move to cheaper countries
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9
Q

in which stage will the production move to cheaper countries: introduction, growth, maturity or decline

A

maturity

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10
Q

what do the critiques say about the product life cycle theory

A

it is outdated and acts like only the US comes up with new products

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11
Q

is product life cycle focused on import or export

A

export

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12
Q

new trade theory, what is it mainly about, the main question

A

why do countries trade even if they DON’T DIFFERENT RESOURCES OR ADVANTAGES?

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13
Q

New trade theory: why do countries trade even if they DON’T DIFFERENT RESOURCES OR ADVANTAGES? whats the answer

A

economies of scale: it decreases the cost of goods but INCREASES THE VARIETY OF GOODS AVAILABLE TO CUSTOMERS

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14
Q

economies of scale (and which theory and whats the question)

A

new trade theory

why do countries trade even if they dont have different resources?

cost reductions due to large scale production

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15
Q

in the new trade theory, economies of scales allow for … (second points

A

increased product variety and reduction in costs

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16
Q

what would happen in a world without trade according to the new theory

A

more expensive and less variety

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17
Q

how do you get economies of scale according to the new trade theory (third point)

A

first mover advantage: ability to gain economies of scale before everyone else –> company can benefit from lower cost structures

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18
Q

first mover advantage

A

new trade theory

ability to gain economies of scale before everyone else –> company can benefit from lower cost structures

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19
Q

implications of new trade theory

A
  • Nations may benefit from trade even when they do not differ in resource endowments/technology
  • a country can predominate in the export of good because it was lucky enough to be the first one
  • useful in explaining trade patterns
  • luck, entrepreneurship and innovation give first mover advantage
  • a bit help from the government can help to start up small businesses because if they grow big they are the winners
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20
Q

which 3 things lead to first mover advantage in the new trade theory

A

luck
enterpreneurship
innovation

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21
Q

whats according to the new trade theory the governments part?

A

The theory suggests it’s sometimes smart for governments to help early-stage industries (especially in exports), because getting in first can lead to big long-term advantages.

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22
Q

porter’s diamond, whats the main thing

A

explain why certain nations achieve international success in a particular industry

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23
Q

national competitiveness depend on the ability of its industry to
- new
- maintain
- external

A

innovate
upgrade
domestic pressures & challenges create competitive firms

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24
Q

the 4 things for porters diamond

A
  1. factor endowments (factors of production)
  2. demand conditions (nature of home demand)
  3. related and supporting industries (presence =/absence of suppliers industries and related industries that are competitive)
  4. firms strategy, structure and rivalry (how companies are created, organized and managed and the nature of the domestic rivalry)
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25
what does porter say about the 4 components
to boost competitive performance, they need all the 4 of them to be present
26
production can be divided in to kinds of factors: basic and advanced
basic: raw materials, things you have in your land advanced: infrastructure, capital
27
which one are most advanced and important ones: advanced or basic
advanced
28
Conditions that govern how companies are created, organized, managed, and the nature of domestic rivalry
1. management ideology 2. the rela between domestic rivalry and innovation: high domestic rivalry leads to increase in innovation
29
nature of home country demand conditions for goods/services
you want a customer who expects good quality, not just a simple product. COMPANIES ARE MOST SENSITIVE TO HOME DEMAND: need DEMANDING and SOPHISTICATED customer
30
presence/absence supplier industries (international level)
spillover effect: flow of knowledge and technologies clusters: related industries who can become really strong
31
what does porters diamond say about government intervention
it can be positive or negative affected by government intervention
32
What does it mean that "the Diamond is a system and attributes are reinforcing"?
The four parts of the Diamond (factor conditions, demand conditions, related industries, and firm rivalry) work together and strengthen each other.
33
If the model is correct, where should countries export from?
Countries should mainly export goods from industries where all four Diamond factors are strong, because that’s where they’ll be most competitive.
34
What is the main criticism of the Diamond model?
There’s no solid proof (empirical evidence) that the model always explains or predicts export success — so it’s a useful idea, not a proven rule.
35
What is the managerial implication of “Location”?
Firms should locate production activities in countries where they can be done most efficiently and profitably
36
Why are “First-Mover Advantages” important for managers?
Being the first to enter a market or industry can bring long-term competitive benefits
37
What should governments do, according to Porter’s view?
Governments should support national competitiveness by investing in: EDUCATION → skilled workforce INFRASTRUCTURE → transport, power, digital systems BASIC RESEARCH → innovation and future technologies
38
free trade leads to static and dynamic economic gains, whats the difference
static: Short-term, one-time gains dynamic: Long-term growth benefits
39
TARIFFS: specific tariffs and ad volarem tariffs
specific: fixed charge for each unit ad valorem tariffs: proportion of the value
40
impact of tariffs for - government - producers - consumers
- government: increases revenue - producers: domestic producers get protection from foreign producers - consumers pay for imports pro-producer, anti-consumer REDUCES OVERALL EFFICIENCY OF THE WORLD ECONOMY
41
SUBSIDIES - what ways - producers - consumers
- multiple ways: cash grants, low-interest loans, tax breaks, government equity participation - helps domestic producers - consumers usually absorb the cost because it falls on tax-payers
42
which sector gets most subsidies in most countries
agriculture
43
whats the disadvantage of subsidies between producers
can promote INEFFICIENCY, it can STOP COMPETITION
44
Import Quotas and Voluntary Export Restraints
Import quotas are direct restrictions on quantity of some good that may be imported in a country
45
Tariff rate quotas
provide a lower tariff rate to imports within the quota than those over the quota.
46
Voluntary export restraint (VER)
is a quota on trade imposed by the exporting country
47
Quota rent
rent refers to the extra profit PRODUCERS make when supply is artificially limited by an import quota.
48
Export Tariffs and Bans, whats the goal
Goal is to discriminate against exporting in order to ensure that there is sufficient supply of a good within a country
49
Export ban
is a policy that partially or entirely restricts the export of a good
50
Local Content Requirement
Some fraction of a good must be produced locally
51
Local Content Requirement can be expressed in two ways
physical or value terms
52
Local Content Requirement protects who and is bad for who?
domestic producers but consumers face higher prices
53
who uses local content requirement mostly, what kinds of countries
developing countries
54
Administrative Policies, who do they hurt
Use of informal policies to restrict imports and boost exports Bureaucratic rules designed to make it difficult for imports to enter a country. Hurt consumers by limiting choice.
55
Antidumping Policies
Dumping occurs when companies sell goods in a foreign market at below their costs of production or below their “fair” market value. a way to unload excess production Antidumping policies: punish foreign firms that engage in dumping and thereby protect domestic producers from unfair foreign competition countervailing duties
56
What are the political arguments for intervention of the government
1. Protecting Jobs and Industries 2. Protecting National Security 3. Retaliating (=a country puts up trade barriers to fight back against unfair trade from another country) 4. Protecting Consumers 5. Furthering Foreign Policy Objectives 6. Protecting Human Rights
57
whats the most common political reason for government intervention
protecting jobs and industries
58
What are the economic arguments for intervention of the government?
1. Infant Industry Argument 2. Strategic Trade Policy
59
The Infant Industry Argument
*Governments should temporarily support new industries until they have grown strong enough to meet international competition. *Support comes through tariffs, import quotas, subsidies.
60
Two criticisms infant industry argument
1.Protection of manufacturing from foreign competition does no good unless the protection helps make the industry efficient. 2.Assumes firms are unable to make efficient long-term investments by borrowing money from the domestic or international capital market
61
Who proposed the Infant Industry Argument and when?
Alexander Hamilton, in 1792.
62
What was Hamilton’s main point?
New industries in a country need temporary protection to grow strong enough to compete with established foreign industries.
63
What kind of advantage did Hamilton believe developing countries had?
A potential comparative advantage, meaning they could be competitive in manufacturing in the future, with the right support now.
64

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