Daozhi Zeng: Pro-competitive Effect, and Trade In
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Mobile Capital, Pro-competitive Effect, and Trade Integration

Theoretical models are confronting with the test of reality and academic generalization, especially for the studies of international trade. This seminar, held in Room 710, Fanhai Building, on 10th, Dec. 2015, had the honor to invite Professor Zeng Daozhi of Tohoku University, Japanese, to present his latest work on the generalized model of trade integration. Professor Ming Lu, Dr. Jianfeng Wu and Professor Zhao Chen with some of the PhD students participated in this seminar.


For starters, Professor Zeng introduced several popular theoretical models which were commonly taken used in modern international trade studies. “However, their loopholes or problems are just as obvious as their merits of convenience.” He said.

The central question that Professor Zeng were interested in was HME, a.k.a. the home market effect. “Autarky and bilateral trade aside, economists happen to observe one-way trade which means, based on empirical studies, around 40% of the mount of international trade is actually bilateral trade from small countries to large countries. Essentially, it is caused by the variety of alternation of firm markup.” Professor Zeng said.

In order to uncover the mechanism of markup, Professor Zeng replace traditional model with hyperbolic absolute risk aversion model, a.k.a. HARA. “Unlike CES and CARA, HARA is more generalized in the aspect of the explanation of one-way trade pattern.” Professor Zeng said.

The explicit solution of specific HARA was promising. With certain constant parameter set up, HARA numerical simulation indicated that one-way trade occurred in a bilateral trade world. Professor Zeng hoped that the next stage of this research should be combined with empirical works.

In the discussion session, the audience were stuck on the explanation of the parameter b while Professor Ming Lu suggested that b was just part of the marginal effect of the factor on utility de facto. “Whatever its economic implication is, we could just have the estimated result of marginal effect overtake that of b.” Professor Zhao Chen argued that a more pragmatic strategy of empirical study should be taken into consideration. “Utility as dependent variable is so ambiguous. Measurement is critical in the next.”



By SHI Shuo

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