Non-availability approach

The non-availability explains international trade by the fact that each country imports the goods that are not available at home.^[1] This unavailability may be due to lack of natural resources (oil, gold, etc.: this is absolute unavailability) or to the fact that the goods cannot be produced domestically, or could only be produced at prohibitive costs (for technological or other reasons): this is relative unavailability.^[2] On the other hand, each country exports the goods that are available at home.^[2]

As regards the presence or absence of natural resources this aspect could easily be fitted into the Heckscher-Ohlin model that stresses the differences in relative endowments.^[2] A generalized version of the model can be used by adding a factor natural resources.^[2]

The originality of this approach lies in its second aspect, that is, in the reasons put forward to explain international differences in relative availability.^[2] Essentially there are two reasons: technical progress and product differentation.^[2]

As regards the first reason, Kravis observes that the stimulus to exports provided by technological change is not confined to the reduction costs but also includes the advantages deriving form the possession of completely new products and of the most recent improvements of existing types of goods.^[2] In such cases the operation of the demonstration effect of Duesenberry (1949) creates an almost instantaneous demand abroad for the products of the innovating country and thus generates international trade.^[2]

As regards product differentation, the idea of Kravis is to extend to international trade the results of the theory of monopolistic competition.^[2] Different countries produce similar commodities or, more exactly, commodities that are not substantially different from the point of view of their intended purpose (clothes, automobiles, watches, cameras, cigarettes, liqueurs, etc.).^[2] These commodities, however, due to different industrial designs, past excellence, advertising, real or imaginary secondary characteristics and so on and so forth, are considered different by consumers.^[2] This creates, on the one hand, a more or less 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

• Internationalization

References

1. ^ Gandolfo, Giancarlo (1998). International Trade Theory and Policy: With 12 Tables. Irving B. Kravis (1956). Springer. p. 233. ISBN 3540643168. http://books.google.com/books?id=IOtnekHjoJgC&printsec=frontcover#PPA233,M1. 
2. ^ ^{a b c d e f g h i j k l} Gandolfo, Giancarlo (1998). International Trade Theory and Policy: With 12 Tables. Springer. p. 233–234. ISBN 3540643168. http://books.google.com/books?id=IOtnekHjoJgC&printsec=frontcover#PPA233,M1.