Lecture_9_post - 9/21/2008 Specific Factors Model Opening a...

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9/21/2008 1 Lecture 9 Economics 3610 Cornell University Fall 2008 Specific Factors Model Opening a country to trade generates winners and losers. Determining who gains and who loses answers many questions about trade politics many questions about trade politics. Specific Factors model helps explain who gains and who loses. Land assumed specific to agriculture and capital specific to manufacturing Short term model Question How does trade affect the earnings of capital, labor, and land? From the Ricardian model, free trade leads to: Rising relative prices in the export sector Falling relative prices in the import sector So what we really want to know is how changes in relative prices affect the earnings of factors Why are we concerned with relative prices? 1. The earnings of specific or fixed factors (such as capital and land) go up or down the most with changes in relative prices because they are
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This note was uploaded on 12/25/2008 for the course ECON 361 taught by Professor Besh during the Fall '08 term at Cornell University (Engineering School).

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Lecture_9_post - 9/21/2008 Specific Factors Model Opening a...

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