Key international trade theorems and large shocks

Many of the key comparative statics theorems in the theory of international trade are stated and proven only for small changes. Large shocks to equilibrium may change a country's production pattern with trade, and such shocks are shown to provide a non-monotonic kind of response. Considered here are the effects of changes in relative commodity prices or of changes in technology on real wages, or on the location of internationally mobile capital. In addition, the effect of technological improvements abroad on a commodity produced at home may hurt real incomes at home, but perhaps not if the home country's production is completely wiped out by the foreign improvement. (c) 2006 Elsevier Inc. All rights reserved.