lec05-eco101-10

lec05-eco101-10 - InternationalTrade Lecture5 c...

Info iconThis preview shows pages 1–7. Sign up to view the full content.

View Full Document Right Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: InternationalTrade Lecture5 c Marc-AndreasMuendler UniversityofCalifornia,SanDiego October7,2010 5.MobileFactorsandEndowmentDifferences Econ101, c M.Muendler TheHeckscher-OhlinTradeModel • TheHeckscher-OhlinModel(orHeckscher-Ohlin-SamuelsonModel, HOS)analyzestradewhen – Resources can movecostlesslyacrossindustries – Industriesdifferintheintensitiesoffactoruse – Countriesdifferintheendowmentsoffactors • Comparativeadvantagederivesfromrelative factorabundance (in countries),combinedwithrelative factorintensities (inproduction) 5.MobileFactorsandEndowmentDifferences Econ101, c M.Muendler TheHeckscher-OhlinTradeModel • Basicingredients(assumptions) – Numberoffactorsofproduction:2(labor L andland T ) – Mobilityoffactorsofproduction:bothfactorsaremobile – Numberofindustries(goods):2 Computers Q C from T and L ;Food Q F from T and L – Perfectcompetition,transportcosts: – Keyforce :Differencesinfactorintensities and endowments 5.MobileFactorsandEndowmentDifferences Econ101, c M.Muendler MarginalProductsandFactorAllocation • Howmuchlandandlaborwillbeemployedineachsector? Bothlandandlaboraremobileacrosssectors.So,wagesandrental ratesareequalinbothsectorsinequilibriumbytheinputrules. – Thewagerate w willbesuchthat L F + L M = ¯ L and P F · MPL F ( T F /L F )= w = P C · MPL C ( T C /L C ) P F · (1- α F ) A · ‡ T F L F · α F = w = P C · (1- α C ) A · ‡ T C L C · α C – Therentalrate r willbesuchthat T F + T M = ¯ T and P F · MPT F ( T F /L F )= r = P C · MPT C ( T C /L C ) P F · α F A · ‡ T F L F ·- (1- α F ) = r = P C · α C A · ‡ T C L C ·- (1- α C ) 5.MobileFactorsandEndowmentDifferences Econ101, c M.Muendler FactorIntensities • Factorintensities – Computerproductionisrelativelylabor-intensive – Foodproductionisrelativelyland-intensive • Inaworldwithtwogoods(computersandfood)andtwofactors(labor andland),foodproductionisrelatively land-intensive if,atanygiven wage-rentalratio w/r , T F /L F >T C /L C . Theland-laborratioinfoodproductionisgreaterthanincomputer production. 5.MobileFactorsandEndowmentDifferences5....
View Full Document

{[ snackBarMessage ]}

Page1 / 22

lec05-eco101-10 - InternationalTrade Lecture5 c...

This preview shows document pages 1 - 7. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online