lec07-eco101-11

lec07-eco101-11 - InternationalTrade Lecture7 c...

Info iconThis preview shows pages 1–6. 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 Lecture7 c Marc-AndreasMuendler UniversityofCalifornia,SanDiego October13,2011 7.DistributionalConsequencesofClassicTrade Econ101, c M.Muendler DistributionalEffectsofTrade Tradecanhavesubstantialeffectsontheincomedistributionwithina tradingcountry.The reasons include: Resourcescannotmovecostlesslyfromoneindustrytoanother Industriesdifferinthefactorsofproductiontheydemand Tradeliberalizationchangestherelativepricesoffinalgoods Changesinrelativepricescanbeusedtoanalyzedistributional effects Anequalproportionalchangeinallpriceshasnorealeffects 7.DistributionalConsequencesofClassicTrade Econ101, c M.Muendler RelativeWagesinClassicTradeTheory Inallclassictrademodels,wagesareequalacrossindustriesinboth countries(identicalfactorsearnidenticalincomes): w C = w W = w and w * C = w * W = w * . Acrosscountries,wagesdifferintheRicardianmodel: w>w * becauselaborproductivityishigherinHomeinallsectors. Proof . Home: P C = a LC w ,Foreign: P W = a * LW w * ,and a LC a LW < P C P W . So, a LC a LW < a LC w a * LW w * and w w * > a * LW a LW > 1 (Homelaborismoreproductiveatwine). Absentproductivitydifferencesintheotherclassictrademodels,there isFactorPriceEqualization 7.DistributionalConsequencesofClassicTrade Econ101, c M.Muendler DistributionEffectsinthe Heckscher-OhlinModel Eachcountryrealizesoverallgainsfromtrade (improvedworld-widefactorallocation) Thegainsareunevenlydistributed. Tradecanhavesubstantialdistributionaleffects Therelativelyabundantfactorgainsunambiguouslyinrealterms (WorkersinHomegain) Therelativelyscarcefactorlosesunambiguouslyinrealterms (LandownersinHomelose) 7.DistributionalConsequencesofClassicTrade7....
View Full Document

Page1 / 15

lec07-eco101-11 - InternationalTrade Lecture7 c...

This preview shows document pages 1 - 6. Sign up to view the full document.

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