AEM-ECON%202300%20Lecture%205-%20Spring%202011

AEM-ECON%202300%20Lecture%205-%20Spring%202011 - Lecture 5...

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Lecture 5 1 of Prof. David Lee AEM-ECON 2300 So… what determines Comparative Advantage? Cost structure of an industry (increasing, decreasing?) National and international product prices Are marginal (opportunity) costs of production covered by prices? Consumer demands Another determinant: Factor Endowments Factor endowment theory based on… Factor intensities: relative proportions of factors required to produce a unit of output (e.g. K/L ratio, etc.) Factor endowments : relative amounts of factors of production countries possess
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Lecture 5 2 of Prof. David Lee AEM-ECON 2300 Un- Skilled skilled All Country/Region Capital Labor Labor Resources United States 20.8% 19.4% 2.6% 5.6% European Union 20.7 13.3 5.3 6.9 Japan 10.5 8.2 1.6 2.9 Canada 2.0 1.7 0.4 0.6 Rest of OECD 5.0 2.6 2.0 2.2 Mexico 2.3 1.2 1.4 1.4 Rest of L.A. 6.4 3.7 5.3 5.1 China 8.3 21.7 30.4 28.4 India 3.0 7.1 15.3 13.7 H.K.,S. Korea,Taiwan, Sing. 2.8 3.7 0.9 1.4 Rest of Asia 3.4 5.3 9.5 8.7 E. Europe (incl. Russia) 6.2 3.8 8.4 7.6 OPEC 6.2 4.4 7.1 6.7 Rest of World 2.5 4.0 10.0 8.9 Source: Institute for International Economics, 1997.
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Lecture 5 3 of Prof. David Lee AEM-ECON 2300 Un- Skilled skilled All Country/Region Capital Labor Labor Resources United States 20.8% 19.4% 2.6% 5.6% European Union 20.7 13.3 5.3 6.9 Japan 10.5 8.2 1.6 2.9 Canada 2.0 1.7 0.4 0.6 Rest of OECD 5.0 2.6 2.0 2.2 Mexico 2.3 1.2 1.4 1.4 Rest of L.A. 6.4 3.7 5.3 5.1 China 8.3 21.7 30.4 28.4 India 3.0 7.1 15.3 13.7 H.K.,S. Korea,Taiwan, Sing. 2.8 3.7 0.9 1.4 Rest of Asia 3.4 5.3 9.5 8.7 E. Europe (incl. Russia) 6.2 3.8 8.4 7.6 OPEC 6.2 4.4 7.1 6.7 Rest of World 2.5 4.0 10.0 8.9 Source: Institute for International Economics, 1997.
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Lecture 5 4 of Prof. David Lee AEM-ECON 2300 RELATIVE FACTOR ENDOWMENTS, SELECTED COUNTRIES Capital/Labor Capital/Land Labor/Land Country ($/worker) ($/hectare) (workers/ha) Australia 7,415.5 67.2 .009 Austria 4,654.4 2,192.9 .471 Canada 10,583.1 198.0 .019 France 6,868.5 3,136.9 .456 Greece 1,674.3 617.5 .369 Japan 3,358.5 5,286.5 1.574 Korea 320.4 337.3 1.053 Mexico 1,684.8 122.9 .073 Netherlands 6,371.8 1,801.7 1.852 Philippines 529.0 283.6 .536 Spain 2,936.3 760.4 .259 U.K. 4,359.6 5,169.8 1.186 United States 10,260.9 1,058.6 .103 Source: Bowen, Leamer and Sveikauskas, American Economic Review , 1987.
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Lecture 5 5 of Prof. David Lee AEM-ECON 2300 RELATIVE FACTOR ENDOWMENTS, SELECTED COUNTRIES Capital/Labor Capital/Land Labor/Land Country ($/worker) ($/hectare) (workers/ha) Australia 7,415.5 67.2 .009 Austria 4,654.4 2,192.9 .471 Canada 10,583.1 198.0 .019 France 6,868.5 3,136.9 .456 Greece 1,674.3 617.5 .369 Japan 3,358.5 5,286.5 1.574 Korea 320.4 337.3 1.053 Mexico 1,684.8 122.9 .073 Netherlands 6,371.8 1,801.7 1.852 Philippines 529.0 283.6 .536 Spain 2,936.3 760.4 .259 U.K. 4,359.6 5,169.8 1.186 United States 10,260.9 1,058.6 .103 Source: Bowen, Leamer and Sveikauskas, American Economic Review , 1987.
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AEM-ECON%202300%20Lecture%205-%20Spring%202011 - Lecture 5...

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