A DYNAMIC AND STOCHASTIC EXTENSION OF THE MAIN THEOREMS OF INTERNATIONAL TRADE: THE CASE OF EXHAUSTIBLE AND NON-RENEWABLE FACTORS

Abstract

Most of the models of international trade are static and deterministic, factors of production offer services in a given an steady flow for ever and ever. In this paper we provide some extensions to the main theorems in international trade (Ribczynski, Stolper-Samuelson, Hecksher-Ohlin-Samuelson and Factor Price Equalization). We consider exhaustible and non-renewable resources in a dynamic framework where factors and extraction rates are driven by stochastic differential equations following a given trend. In this case, stochastic disturbances such as: market shocks or unexpected increases or decreases in reserves, are modeled through the Brownian motion (the continuous version of a random walk).