CA H-O Model - as l:L'¢1171'm%flwfimmmm Econ 306...

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Unformatted text preview: as. l _ ,- ,'::L'¢1171'm%flwfimmmm Econ 306, International Trade, CA #3. Instructor: James A. Freeman The class assignment illustrates the effects of trade on Income distribution using the Factor Endowment (H-O) Model. See Figure 3.1 in the 14 th or 13‘h Edition of Carbaugh Name: The diagrams below illustrate the transformation schedules for China and U.S. Suppose that an aircrafi is 3. ca ital-intensive roduct and textile is an unskilled labor-intensive roduct. Earning that US is a capital abundant nation and China is an unskilled abundant nation, answer the following questions. Hm" Pre—trade (Awhtr’lflj) Post~tmdc textile {labor-intensive) Textile (labor-intmsive) ,hinaL'S P0955; like; (u Wt, US' Aircrafis (capital-intenSive) Aircrafis (capital-intensive} CA#3. p. I What are the main assumptions of the Factor Endowment (Hockshcr-Ohlin. HO) model? -‘- Sammg * ‘WbblAUALLO (don/mud. (audit-rake) — Same, quaint? o JQWY {npuots 4 fiimdm kchmwpm inflow meta me on @W whom (unmamr). Md httw inhmsit? as the. harm‘s 0? mm Vatknr may. D’h Mdmtoloami in ul’ produohwh} 1 Amamrkurwh- hams as Mu. we"; rig-hank, - Wain M- mu we b. According to the H0 model, ex lain wh US has a 1 er rtun' ' aim rafts? P y ow oppo 1ty cost of produmng Jim/cows; MPH-Al infirm“; mg ; owl-Pal Wdefl'nkhm' Mimi/“Lawful ink—6min, “M1 0M CAW Prom ”(CW9 0% (km-Ufa pr? u, ———o mm mm} 112m in} £04" a. c. According to the HO model, explain why China has a lower opportunity cost of producin Textile? 3 lifl'ileg: laJoo'v ia4~e~f~94v£ 5 Unmet: lad/2w W A tomr awnen'w Mama um pvoMqumus M mattemr ‘Q‘WL-M’r lowut 5X7Y-csv‘mv1ilvy W- ‘..-_‘.r- 24"A‘i-W‘1—u...“ PL: w- %W Phi CL "7 “'9' {U‘MALMTTUK \Chfla’ 1’ cl ohm ' ~ -- ' ‘0 -— Chm \ __ GED-{fierdgk 7 mVDcaeml > $117 “l"‘m‘ {AS I? --*> - ____ AND - cl hiker Dee‘s TMElW > )TPLabo9E 3 “iiléfeii ~——> 4/ ml, r *7 W e. According to the factor price equalization theorem, explain how free trade will lead to an finalization of factor prices between the U.S and China. ‘fin {>de +£Wfivk W W ends W m Eal'i V'L Muflvmfl -., and? thy. ,LY'QL” {my}, (1-0st 16W flu. w 5- WW9“? pm elm-555.51% my . (mauvméfib r 0M I f. In the real world, factor prices may _n_o_t be equal between trading nations. Briefly discuss some of the reasons why the factor prices may g be equal between the U.S and China. :W we Fromm 'D‘WAM WW "us m . Wtowb woi have «em, CA#3, p.3 g. Arcadia; to the EM) madai. the truth: leads to a redistribution of returns (incomes) among . the owners ul‘tiil'tbmit them-s within a nation. Which Factor owners in the US will 1 expel-ink» an mm their real inwmos as it result of trade with China and why? all‘ItWh 6;: 9..th m WW “Slant hm human m twirl-mu. Cm may met, an @tiimti t 0m mumsb W (lthwL h. Whidt factoroum in the LLS will experience a ‘ 1 ' - m with China and why? m In heir real incomes as a result of LtwL-vmi - CUM/«MW _ wl l\ W 0t dLWLELQIC M, (L VISl-tluk‘. ka beams: aka AL, Ulffléc' m Gutpui: + Mil/1L 0M3. p.4 1. {recording lofthe H-O model, free trade leads to a redistribution of returns (incomes) among 16|0Wncrs 9 d1 fijcrem faCtOl'S Within a nation. Which factor owners in China will experience an Wm their real Incomes as a result of trade with U.S and why? Ewe/wt?) 9%er Which factor owners in China will experience a decrease in their real incomes as a result of j. trade with the U.S and why? 9W’WJOW’B Sedan/j Note: The effect of trade on the distributiou of income analyzed above is known as the Stapler- Samuelson theorem and the explanation is called the magnification efi'ect. See the Handout for an elaboration on the Stopler Samuelson theorem. Please try to analyze the effects of trade on the distribution of income in France. casts. p.5 ...
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