Class Hecksher_Ohlin.pdf - 1/48 International Trade Theory...

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International Trade Theory Hecksher - Ohlin: thinking more about trade and inequality Mathieu Parenti Oct 6th, 2016 1/48
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This week on Twitter 2/48
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Inequality: US 1963 - 2008 3/48
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“Old” Facts Important increase in wage inequality in the US between 1970 and 1990. Evidence for both an increase in the skill premium (between-group inequality) within-group (e.g. a group = education * experience * gender ) wage dispersion The timing of the increase, the quantiative importance of the residual wage inequality have been discussed extensively... ...and accompanied by a passionate debate regarding the mechanisms at stake Consensus is reached however that the rise in inequality varies greatly along the distribution. Consensus when looking at the top end of the distribution has increased in the 1970s and the 1980s... 4/48
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New Facts (Van Reenen, 2011) UK and US ... and it keeps increasing until nowaday s. But not only in the U.S.: increase is a ff ecting most OECD countries since the 1990s. Since the early to mid 1990s there has been a polarization of the labour market with those in the middle of the distribution losing out to those in the bottom, as well as the top There is also a dramatic improvement in the position of the top 1% in the last quarter of the 20th Century, especially in the English speaking world There is a substantial increase in “ within skill group ” inequality 5/48
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Is this about trade? 6/48
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Is this about trade? International trade is an ovbious suspect (imports, exports, investment and o ff shore outsourcing) We need a model to think about this: basic Ricardian model is ill-suited to think of wage inequality only one factor all about technology The Hecksher Ohlin model is a simple starting point can also be used as a benchmark to think about the impact of immigration Compared to the mixed specific-factor model: the two factors are perfectly mobile (long-run version) 7/48
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Introducing Hecksher Ohlin Remember: Ricardian CA relies on the opportunity cost of producing one product in a given country There was such a cost because worker productivities di ff er across industries and countries Trade happened because of pure technological di ff erences between countries The Hecksher Ohlin theory is going to assume away these di ff erences and show that di ff erences in factor prices themselves can give a country CA Link with Ricardo? Still a CA theory: countries export what is
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