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Dynamic Home-Made Ratios of Commodities: The Application of Pasinetti's Vertical Hyper-Integration to Trade in Capital Goods.



Commodities are not completely homemade if their production requires imported capital goods directly or indirectly. Applying the concept of vertical hyperintegration developed by L. L. Pasinetti (1988) to the global economy, this paper defines the dynamic homemade ratio for each commodity, which can explain the effects of home and overseas changes in technology and growth rates of consumption demand on the balance of payments. The analysis deepens the understanding of the concept of homemade ratios, which is often referred to without exact definition, and of newly industrializing economies, which have repeatedly suffered unfavorable trade balances despite the strong performance of their exporting industries. (c) 1995 Academic Press, Ltd. Copyright 1995 by Oxford University Press.

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