Trade policy

Technology

Restricted Trade

(Import ban imposed by Portugal)

Free Trade

Benefit from Trade

= VT/VR

Prod

Cons

Wine Priceb

Total value (VR)

Prod

Cons

Wine Priceb

Total value (VT)

Convex technology

r = 0

s = 1 (Ricardo’s example)

WE: 0.934

CE: 1.080

WP: 1.077

CP: 0.931

wE: 1.080

cE: 1.080

wP: 0.931

cP: 0.931

E: 1.20

P: 0.889

4.089

WE: 0

CE: 2.2

WP: 2.125

CP: 0

wE: 1.141

cE: 1.016

wP: 0.984

cP: 1.184

E: 1.069

P: 1.069

4.472

1.093

r = −0.1

s = 1

WE: 0.945

CE: 1.066

WP: 1.065

CP: 0.942

wE: 1.079

cE: 1.066

wP: 0.931

cP: 0.942

E: 1.186

P: 0.90

4.086

WE: 0.384

CE: 1.690

WP: 1.666

CP: 0.365

wE: 1.101

cE: 0.949

wP: 0.950

cP: 1.106

E: 1.034

P: 1.034

4.177

1.022

r = −0.3

s = 1

WE: 0.959

CE: 1.049

WP: 1.049

CP: 0.956

wE: 1.078

cE: 1.049

wP: 0.930

cP: 0.956

E: 1.168

P: 0.914

4.083

WE: 0.766

CE: 1.261

WP: 1.252

CP: 0.758

wE: 1.083

cE: 0.933

wP: 0.935

cP: 1.086

E: 1.033

P: 1.033

4.104

1.005

r = −0.5

s = 1

WE: 0.967

CE: 1.039

WP: 1.039

CP: 0.965

wE: 1.077

cE: 1.039

wP: 0.929

cP: 0.965

E: 1.158

P: 0.923

4.082

WE: 0.857

CE: 1.158

WP: 1.153

CP: 0.853

wE: 1.080

cE: 0.929

wP: 0.931

cP: 1.082

E: 1.033

P: 1.033

4.089

1.002

Non-convex technology

r = 0.1

s = 1

WE: 0.917

CE: 1.10

WP: 1.096

CP: 0.916

wE: 1.081

cE: 1.10

wP: 0.932

cP: 0.916

E: 1.222

P: 0.873

4.093

WE: 0

CE: 2.401

WP: 2.310

CP: 0

wE: 1.240

cE: 1.109

wP: 1.070

cP: 1.292

E: 1.073

P: 1.073

4.881

1.192

r = 0.3

s = 1

WE: 0.833

CE: 1.212

WP: 1.185

CP: 0.844

wE: 1.083

cE: 1.212

wP: 0.934

cP: 0.844

E: 1.343

P: 0.803

4.126

WE: 0

CE: 3.081

WP: 2.932

CP: 0

wE: 1.574

cE: 1.423

wP: 1.358

cP: 1.658

E: 1.085

P: 1.085

6.262

1.518

r = 0.5

s = 1

WE: 0

CE: 4.787

WP: 1.952

CP: 0.418

wE: 1.048

cE: 4.787

wP: 0.904

cP: 0.418

E: 5.481

P: 0.411

6.009

WE: 0

CE: 4.787

WP: 4.468

CP: 0

wE: 2.399

cE: 2.211

wP: 2.069

cP: 2.576

E: 1.106

P: 1.107

9.731

1.619

r = 0.7

s = 1

WE: 0

CE: 12.32

WP: 3.048

CP: 0.234

wE: 1.636

cE: 12.32

wP: 1.412

cP: 0.234

E: 9.036

P: 0.148

13.01

WE: 0

CE: 12.32

WP: 11.02

CP: 0

wE: 5.914

cE: 5.693

wP: 5102

cP: 6.630

E: 1.155

P: 1.155

25.05

1.926

r = 0.9

s = 1

WE: 0

CE: 229.6

WP: 28.32

CP: 0.013

wE: 15.20

cE: 229.6

wP: 13.12

cP: 0.013

E: 18.13

P: 0.001

229.6

WE: 0

CE: 229.6

WP: 176.1

CP: 0

wE: 94.52

cE: 106.1

wP: 81.54

cP: 123.5

E: 1.347

P: 1.347

466.7

2.032

Scale effects:

r = 0,

any s > 0

WE: 0.934

CE: 1.080

WP: 1.077

CP: 0.931

wE: 1.080

cE: 1.080

wP: 0.931

cP: 0.931

E: 1.20

P: 0.889

4.089

WE: 1

CE: 1

WP: 1

CP: 1

wE: 1

cE: 1

wP: 1

cP: 1

E: 1.069

P: 1.069

4.472

1.093