{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

WK4_5Sept_Ch_4

# WK4_5Sept_Ch_4 - Week 4(Tuesday Sept 6 2011 Review final...

This preview shows pages 1–14. Sign up to view the full content.

Review final portion of previous Lecture Introduce Chapter 4 Trade: Factor Availability and Factor Proportions are Key Week 4 (Tuesday, Sept. 6, 2011)

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

View Full Document
Suppose Wheat, Cloth and Shoes Suppose: a w /a w * < a s /a s * < a c /a c * U.S. exports W U.S. imports C Case 1: a w /a w * = .5 < a s /a s * = .75 < a c /a c * = .90 Case 2: a w /a w * = 1.3 < a s /a s * = 1.5 < a c /a c * = 4.0
What about S? Need ω/ω* When P w /P w * = ωa w / ω*a w * < 1 RoW imports (a w /a w *) < ( ω*/ω) When 1 < ωa C / ω*a C * = P C /P C * RoW exports ( ω*/ω) < (a c /a c *) Key: (ω*/ω) vs (a s /a s *) High Foreign wages hurt High Foreign wages offset by productivity advantage

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

View Full Document
What about S? Case 1 a w /a w * < a s /a s * < a c /a c * (ω*/ω) Row export S Case 2 a w /a w * < a s /a s * < a c /a c * (ω*/ω) RoW import S ω* influenced by the average level of the a’s

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

View Full Document
How well does it predict? Testing the Ricardo Model
Data for U.K. and U.S. exports to third countries shortly after WWII U.S. Exports to i/U.K Exports to i U.S. industry ABSOLUTELY more productive in all 13 industries for which data was available U.S. wages over 2x those in U.K. GDA MacDougall’s 1954 Study

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

View Full Document
G.D.A. MacDougall’s 1951 Data U.S. Exports to Output per Third Market U.S. Worker (Market Share) Industry ------------------- -------------------- U.K. Exports to Output per Third Market U.K. Worker (Market Share) Pig Iron 3.6 5.1 Motor Cars 3.1 4.3 Machinery 2.7 1.5 Glass Containers 2.4 3.5 Paper 2.2 1.0 Cigarettes 1.7 .47 Leather Footwear 1.4 .32 Hosiery 1.8 .30 Cotton Spinning 1.5 .11 Beer 2.0 .056 Cement 1.1 .091 Wool 1.35 .004 Apparel 1.25 .044 a uk a uk a us a us

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

View Full Document
(ω*/ω) and (a s /a s *) (ω*a s *)/(ωa s )
Trade patterns between countries are determined to a significant degree by relative differences in their labor productivities. This simple theory has impressive empirical support. Conclusion

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

View Full Document
Consider New Theory
Recall: Basic Determinants of Prices Demand: Tastes or preferences Income Supply: Technology** Ch. 3--Ricardo Cost of inputs ** Ch. 4—Hecksher- Ohlin Government Policies: Taxes, subsidies

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

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

{[ snackBarMessage ]}

### What students are saying

• As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

Kiran Temple University Fox School of Business ‘17, Course Hero Intern

• I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

Dana University of Pennsylvania ‘17, Course Hero Intern

• The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

Jill Tulane University ‘16, Course Hero Intern