Lectures10n11

Lectures10n11 - Lectures 10 and 11: Factor Endowments,...

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Lectures 10 and 11: Factor Endowments, Factor Mobility and Trade Chapters 4 & 5, Feenstra & Taylor
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Plan Extensions of Hecksher-Ohlin (Ch. 4) International Mobility of Labor (Ch. 5) International Mobility of Capital (Ch. 5)
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Extensions of Heckscher-Ohlin Many Goods, Factors, and Countries Complications of measurement: Countries’ factor intensity. Industries’ Factor intensity. Measuring the Factor Content of Trade Factor intensity of aggregate exports and imports. Use this to test the HO model?
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Measuring the Factor Content of Trade Multiply Leontieff’s numbers by the actual value of U.S. exports and U.S. imports. Values for “total exports” and “total imports.” These values are called the factor content of exports and factor content of imports. They measure the amounts of labor and capital used to produce exports and imports.
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Factor Content of Trade for the United States, 1947
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The Factor Content of Trade U.S. was running a large trade surplus, hence both labor and capital contents are positive. U.S. labor and capital were being used to rebuild Europe after WWII.
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Measuring Factor Abundance Multiple factors and multiple countries. Compare the country’s share of the world supply of that factor with the country’s share of world GDP. If the share of a factor > share of world GDP. The country is abundant in that factor. If the share of factor < share of world GDP. The country is scarce in that factor.
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Country Factor Endowments, 2000
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Capital Abundance For example, 24% of the world’s physical capital is located in the U.S., 8.7% is located in China, 13.3% in Japan, etc. The U.S. had 21.6% of world GDP, China had 11.2%, Japan had 7.5%, etc. U.S., Japan and Germany abundant in physical capital. The opposite holds for China and India.
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Relative Abundance of other factors Similar comparisons: U.S. is abundant in R&D scientists: 26.1% of the world’s total as compared to 21.6% of the world’s GDP. The U.S. is also abundant in skilled labor but is scarce in less-skilled labor and illiterate labor. India is scarce in R&D scientists: 2.5% of world’s total as compared to 5.5% of the world’s GDP. U.S. is also scarce in arable land!! Productivity differences → Measurement problems
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Countries It is plausible that labor is highly productive in the U.S. and less productive in the rest of the world. Then the effective labor force in the U.S. is much larger than if we just count people. Effective labor force is the labor force times its productivity. Let’s add differing productivities into the HO model.
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Lectures10n11 - Lectures 10 and 11: Factor Endowments,...

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