Non-availability approach

The non-availability approach (introduced by Irving B. Kravis, 1956) is a concept explaining international trade by the fact that each country imports the goods that are not available at home.[1] This unavailability may be due to absolute unavailability (lack of natural resources), or to relative unavailability (goods cannot be produced domestically, or only at prohibitive costs).[2] On the other hand, each country exports goods that are available at home.[2]

Absolute unavailability

Absolute unavailability could be fitted into the Heckscher-Ohlin model that stresses differences in relative endowments.[2] A generalized version of the model can be used by adding a natural resources factor.[2]

Relative unavailability

The originality of the non-availability approach lies in the explanation of international differences in relative availability.[2] Relative availability is largely due to technological progress and product differentation.[2]

Technical progress

Kravis observes that the stimulus to exports provided by technical progress is not confined to cost reduction, but also includes the advantages of possessing new products, and the most recent improvements of existing types of goods.[2] In such cases, the demonstration effect creates an almost instantaneous demand abroad for the products of the innovating country and thus generates international trade.[2]

Product differentiation

The non-availability approach extends the theory of monopolistic competition to international trade.[2] Different countries produce commodities that are similar from the point of view of their intended purpose (clothes, automobiles, watches, cameras, cigarettes, liqueurs, etc.).[2] However, due to different industrial designs, past excellence, advertising, and real or perceived secondary characteristics, these commodities are considered different by consumers.[2] This creates, on the one hand, a limited monopolistic power of the single producing countries, and on the other a consumers' demand for foreign commodities that they believe different from similar domestic commodities, the result being to create international trade.[2]

See also

References

  1. ↑ Gandolfo, Giancarlo (1998). International Trade Theory and Policy: With 12 Tables. Irving B. Kravis (1956). Springer. p. 233. ISBN 3-540-64316-8.
  2. 1 2 3 4 5 6 7 8 9 10 11 12 Gandolfo, Giancarlo (1998). International Trade Theory and Policy: With 12 Tables. Springer. pp. 233–234. ISBN 3-540-64316-8.
This article is issued from Wikipedia - version of the 10/19/2016. The text is available under the Creative Commons Attribution/Share Alike but additional terms may apply for the media files.