9.27 notes - output of the other good Stolper-samuelson...

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Empirical Evidence on the Heckscher-Ohlin Model -Leontief found that US exports were less capital-intensive than US imports, even though the US is the most capital-abundant country in the world Heckscher-Ohlin Theorem – the comparative advantage aarisses from factor endowments in this model. A country exports the that that uses intensively the factor that is in abundance in that country Factor-price equalization theorem – free trade in commodities brings about an equalization of factor prices between countries even though these factors are not mobile across them -even when factors are immobile between the two countries, unrestricted trade in goods tends to equalize the price of each factor across countries. -trade in output serves as a “substitute” for trade in factors of production Rybczynski theorem – an increase in a country’s endowment of a factor will casue an increase in output of the good which uses that factor intensively, and a decrease in the
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Unformatted text preview: output of the other good Stolper-samuelson theorem – an increase in the relative price of the eg the labor-intensive commodity (brought about for example by a tariff) unambiguously causes the real wage to increase and the rental rate of capital to decrease.-link between changes in output prices and change sin factor price-most general form: an increase in the relative price of a good increases the real return to the factor used intensively in that good’s production and decreases the real return to the other factor.-factor prices change proportionally more than output prices A MODEL OF A TWO-FACTOR ECONOMY-how do the outputs of the two goods change when the economy’s resources change?-RYBCZYNSKI THEOREM (EFFECT)-if a factor of production (T or L) increases, then the supply of the good that uses this factor intensively increases and the supply of the other good decreases for any given commodity prices....
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This note was uploaded on 01/25/2012 for the course ECONOMICS 300:04 taught by Professor Choudhary during the Fall '11 term at Rutgers.

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