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A clockwork economy

This research explores the transformation in South Africa's trade structure with the EU and China from 1993 to 2006 using a three-dimensional trade model embedded in general equilibrium theory. Factors like factor intensity, endowment triangle, and triangles of diversification are analyzed. The study focuses on trade flows, comparative advantages, and specializations in imports and exports. Theoretical inspirations from renowned scholars and graphical solutions are also discussed. The paper concludes with recommendations for future research areas.

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A clockwork economy

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  1. A clockwork economy • A three-dimensional trade model imbedded in the general equilibrium theory • Koen Smet – Institute of International • Economics and Development • 2nd FIW-Research Conference – International Economics

  2. Structure • South Africa´s trade structure with the EU and China and its evolution between 1993-2006. • New classification measure • A three dimensional trade model • Basic structure • Factor intensity • A graphical solution • The endowment triangle • Triangles of diversification • Conclusion

  3. The evolution of the South African trade structure 1993-2006

  4. Dynamic analysis: new approach Intra-into (2%) Intra industry Brül Intra-intra (9%) Intra-out of (6%) Trade Date GL Inter Adv. Inter-into (+) (8%) Brül Inter-intra (+) (8%) Inter industry RCA Inter-out of (+) (8%) Inter-into (-) (6%) Inter Disadv. Brül Inter-intra (-) (21%) Inter-out of (-) (32%) Folie 4

  5. Revealed Comparative AdvantagesGeneral

  6. Export Flows – Matrix Classification

  7. Results of the empirical analysis • General findings • Grubel-Lloyd index • Trade specialisation between 1993 and 2006 • Trade Flows • Imports (EU): Medium and high-technology products, whose production is labour- or capital-intensive • Imports (China): Labour-intensive, low- and medium-technology consumer goods • Exports: Primary resource-based manufactures (cf. mining and quarrying industries) and low-technology capital-intensive manufactures

  8. Theoretical Model - Inspiration • Literature: • Samuelson (1953) • Chipman (1966 / 1969) • Batra (1970) • Jones and Scheinkman (1977) • Chang (1979) • Takayama (1981) • Ethier (1984) BUT: Focus on the mathematical solvability of the model and the generalisation of the 2x2x2 theorems.

  9. Theoretical Model - Assumptions • Basic structure • Three production factors: L, H and K • Three industries • Three countries: South Africa, EU and China • Further assumptions • Zero-Profit condition • Market-Clearing condition

  10. Theoretical Model – Factor Intensity • Double bilateral comparison is not applicable • The ratio of the distributive share of a certain factor within a specific industry and this factors overall distributive share

  11. The Endowment Triangle • Literature • McKenzie (1955) • Leamer (1987) • Jones and Marjit (1991) • Jones (1992 / 2005)

  12. Graphical solution – The concept of the endowment triangle

  13. Endowment triangle - Application

  14. Triangles of diversification

  15. Import and export flows

  16. Concluding remarks • During the period 1993-2006 specialisation was the dominant trend within the South African trade structure. • The concepts of endowment triangles and of triangles of diversification allow for the construction of a three-dimensional Heckscher-Ohlin-Samuelson trade model. • Further research should concentrate on: • a discussion of the input-vectors. • a comparative static analysis between autarky and free trade. • the empirical justification of educated assumptions.

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