lec05-eco101-11

lec05-eco101-11 - 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 DocumentRight Arrow Icon

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

View Full DocumentRight Arrow Icon

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

View Full DocumentRight 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 October6,2011 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- F ) A ( T F L F ) F = w = P C (1- C ) A ( T C L C ) 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 F A ( T F L F )- (1- F ) = r = P C C A ( T C L C )- (1- 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.MobileFactorsandEndowmentDifferences Econ101, c...
View Full Document

This note was uploaded on 01/30/2012 for the course ECON 101 taught by Professor Jacobson during the Fall '03 term at UCSD.

Page1 / 22

lec05-eco101-11 - 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