The Neotechnology Account of International Trade: The Case of Petrochemicals
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STOBAUGH
Since the publication of the Leontief paradox in 1953, there has been a proliferation of theories and studies intended to provide a better explanation of observed trade patterns than does the traditional factor proportions theory.' Authors of the newer theories have relaxed some of the restrictive simplifications of the traditional factor proportions theory, as defined in the Heckscher-Ohlin-Samuelson model, such as two homogenous factors of production (capital and labor), constant returns-to-scale of production functions, international identity of production functions and factors, international similarity of preferences,, and perfect competition. Two of the newer theories have emphasized the dynamic aspects of international trade, one focusing on the production factors-the technological gap theory of Posner and Hufbauer2-and the other focusing on marketing factors-the product life cycle theory of Vernon.3 These two theories have so many elements in common that any exact distinction between them is arbitrary.4Johnson combined them with a scale-economy *I benefitted from discussions with Professors Edith Penrose, Raymond Vernon, and Louis T. Wells, Jr. The research was financed partially by the Ford Foundation and the Harvard Business School as part of a broader study of "The Multinational Enterprise and the Nation State," coordinated by Professor Raymond Vernon. 1. These are summarizedin G. C. Hufbauer, "The Impact of National Characteristics and Technology on the Commodity Composition of Trade in Manufacturing Goods," in The Technology
Factor in International
Trade, ed. by Raymond
Vernon (New York: National Bureauof Economic Research, 1970), pp. 145-232. 2. M. V. Posner, "InternationalTrade and Technological Change," Oxford Economic Papers, XIII (October 1961), pp. 323-41; and G. C. Hufbauer, Synthetic Materials and the Theory of International Trade (Cambridge:
sity Press, 1966).
Harvard Univer-
3. Raymond Vernon, "International Investment and International Trade in the Product Life Cycle," Quarterly Journal of Economics,
LXXX
(May 1966),
pp. 190-207. 4. Hufbauer, "The Impact of National Characteristics and Technology on the Commodity Composition of Trade in ManufacturedGoods," p. 149.
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theory into one "neotechnology" account of international trade, which he then includes as part of a modified factor proportions theory.5 The research described in this paper concerns world trade in petrochemicals and springs from Vernon's product life cycle theory; therefore, it also is part of Johnson's neotechnology account of international trade. In fact, after the early stage in the life of a petrochemical, product quality becomes standardized; then technological changes become a major determinant of economic behavior. Hence, the observed changes in economic behavior in the petrochemical industry could be referred to as a "technological life cycle"
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