1
Lesson 16
1
Winners and Losers
All workers in a Ricardian model benefit
from trade
Casual observation and empirical evidence
suggest that some workers are harmed by
trade
How can we model the economy so that
trade harms some while benefiting others?
Lesson 16
2
Simplified version of Ricardo-Viner
(specific-factors) model
Assume two goods (
X
and
Y
)
Assume
two
factors of production:
-labor that can
only
be used to produce
X
(
L
X
)
-labor that can
only
be used to produce
Y
(
L
Y
)
Lesson 16
3
The full employment conditions
LX
X
X
a
Q
L
=
LY
Y
Y
a
Q
L
=
X
X
LX
L
Q
a
=
Y
Y
LY
L
Q
a
=
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