r

in all countres;
roductioa. Ths
Ie. Therefore. it
rade is the nm
-I
• is so, why ,m
classical thco:y ~:.....
I
sic example.ne
I this importatt

less. As we stuU
that productnm
xistence of con-

om trade anO.1S
sed to posnse
rriers are ham .. t: .s. nports
est policy. L·.K. exports
 Fi1:ur~ 3.16 MacDoupJ"$ findings. (..l/rer MacDougall.. 1951.)

f of the classical ~lacDougall found that in 1937 American wages were about double those in
studies supprrt Britain. He concluded that. approximately. American money costs of production
lade by Balasa are equal to, lower. or higher than British money costs according as the producti
basis of data 'Irr vity ratio (output per U.S. worker/output per U.K. worker] is equal to. lower, or
~, cDougall), Il-:O higher than 2. Thus. for productivity ratios lower 6an 2, Britain had the cost
-advantage; for productivity ratios higher than 2. America had the cost advan
this: given IVO tage; and for productivity ratios equal to 2. neither country enjoyed a significant
fl the ratio ol irs cost advantage.
ley wage-ratero Two questions arise in relation to MacDougill's results summarized in
B commodity fig. 3.16. First, one may expect the export ratio to be about I when the producti
X vity ratio is about 2 (that is, that the line KM UL should intersect the horizontal
line AI VS at V-not M~ and clearly this is not the case. The productivity ratio
.ndustry groips needs to be significantly higher than 2 (about 2.5) for the export ratio to be equal
erican to Brnsh to I. MacDougall gives two reasons for this discrepzncy.
II excluded i11!
because (a) ~ a I. The productivity data reflect the direct labor recuirements onlv, and he ob
1 95 perceni.iof served that the American indirect labor requirernects (for transporting, distrib
d (b) the heunt uting, and servicing] were more than half the coeresponding British indirect
ctor and tented labor requirement. MacDougall concluded tbu on balance the figures
the world b.rh probably exaggerated the overall American superiority.
s. 2. British exports (0 Commonwealth countries faced lower tariffs than American
wn on a doune exports because of the discriminatory arrangement called imperialpreference
isitively skned (see chap. 22).
each countn ro
anrage becone»

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