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Population growth and the pattern of trade: A Neo-Ricardian approach
Economics Letters 2 (1979) 143-144 0 North-Holland Publishing Company
POPULATION GROWTH AND THE PATTERN OF TRADE A Neo-Ricardian Approach Murray C. KEMP University of New South Wales, Kensington, Received
NSW 2033, Australia
April 1979
If the young and old provide economically distinct of the population determines the factor endowment of output and the pattern of foreign trade.
factors ratios
of production and therefore
then the rate of growth both the composition
1. Introduction In the textbook-simplified version of the Torrens-Ricardo theory of international trade there is a single homogeneous primary factor of production, labour. From the point of view of production, the services of a young person are equivalent to those of an old person. The rate of growth of the population therefore has no bearing on the pattern of production and trade. But suppose that the young and the old provide economically distinguishable factors of production (the young are strong and masters of simple repetitive skills, the old have skills which can be acquired only by time spent on the job). Then the rate of growth of the population (and of the economy) determines the factor-endowment ratio and therefore both the composition of total output and the pattern of trade. In particular, in the two-commodity case there is a rate of growth which annihilates trade; for rates of growth less than that critical rate one commodity is exported, for rates of growth in excess of the critical rate the other commodity is exported. My purpose in the present note is to expound this simple idea in detail for a small country.
2. Analysis Let the total population N,, the subpopulation of young people N: and the subpopulation of old people N: all grow at the same rate 7) (q $ 0), so that Nt =No(I
+#,
iv: = Nh( 1 + T#, N: =NZ(l
+#. 143
MC. Kemp /Population
144
growth and the pattern of trade
Since N,=Ni
t&
=N;
tlvf,
we can calculate that
and that the endowment k,-N;/N;
= 1 tq.
ratio is (1)
Two commodities are produced under conditions of constant returns with unequal factor intensities. Given world prices there exist 6 and R, k < k, such that for all k < & only the commodity relatively intensive in its use of old labour is produced and such that for all k 2 E only the commodity relatively intensive in its use of young labour is produced. If the community’s preferences are homothetic, there exists a critical value of k, say k* (k < k*
Gale, D., 1973, Pure exchange equilibrium of dynamic economic models, Journal of Economic Theory 6, 12-36. Samuelson, P.A., 1958, An exact consumption-loan model of interest with or without the social contrivance of money, Journal of Political Economy 66,467-482.
POPULATION GROWTH AND THE PATTERN OF TRADE A Neo-Ricardian Approach Murray C. KEMP University of New South Wales, Kensington, Received
NSW 2033, Australia
April 1979
If the young and old provide economically distinct of the population determines the factor endowment of output and the pattern of foreign trade.
factors ratios
of production and therefore
then the rate of growth both the composition
1. Introduction In the textbook-simplified version of the Torrens-Ricardo theory of international trade there is a single homogeneous primary factor of production, labour. From the point of view of production, the services of a young person are equivalent to those of an old person. The rate of growth of the population therefore has no bearing on the pattern of production and trade. But suppose that the young and the old provide economically distinguishable factors of production (the young are strong and masters of simple repetitive skills, the old have skills which can be acquired only by time spent on the job). Then the rate of growth of the population (and of the economy) determines the factor-endowment ratio and therefore both the composition of total output and the pattern of trade. In particular, in the two-commodity case there is a rate of growth which annihilates trade; for rates of growth less than that critical rate one commodity is exported, for rates of growth in excess of the critical rate the other commodity is exported. My purpose in the present note is to expound this simple idea in detail for a small country.
2. Analysis Let the total population N,, the subpopulation of young people N: and the subpopulation of old people N: all grow at the same rate 7) (q $ 0), so that Nt =No(I
+#,
iv: = Nh( 1 + T#, N: =NZ(l
+#. 143
MC. Kemp /Population
144
growth and the pattern of trade
Since N,=Ni
t&
=N;
tlvf,
we can calculate that
and that the endowment k,-N;/N;
= 1 tq.
ratio is (1)
Two commodities are produced under conditions of constant returns with unequal factor intensities. Given world prices there exist 6 and R, k < k, such that for all k < & only the commodity relatively intensive in its use of old labour is produced and such that for all k 2 E only the commodity relatively intensive in its use of young labour is produced. If the community’s preferences are homothetic, there exists a critical value of k, say k* (k < k*
Gale, D., 1973, Pure exchange equilibrium of dynamic economic models, Journal of Economic Theory 6, 12-36. Samuelson, P.A., 1958, An exact consumption-loan model of interest with or without the social contrivance of money, Journal of Political Economy 66,467-482.