Chapter_3_The_Heckscher-Ohlin_Model

And the price of labor rises in china ppf after trade

Info icon This preview shows pages 28–41. Sign up to view the full content.

View Full Document Right Arrow Icon
and the price of labor rises in China. PPF* After trade, the relative price of aircrafts increases in the US. The US production moves from A to B after trade. After trade, the relative price of aircrafts decreases in China. China’s production moves from A* to B* after trade. 28
Image of page 28

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

View Full Document Right Arrow Icon
The Stolper-Samuelson Theorem Free international trade benefits the abundant factor and harms the scarce factor. Notes: (1) The Stolper-Samuelson theorem establishes a reason for some groups in a society to oppose international trade. Thus, it provides insights into why governments may impose barriers to trade. (2) The country overall gains from trade. 29
Image of page 29
30
Image of page 30

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

View Full Document Right Arrow Icon
31
Image of page 31
32
Image of page 32

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

View Full Document Right Arrow Icon
Trade and Wage Inequality Between the late 1970s and the early 1990s, there was a sharp increase in the inequality of wages in the United States. Why has wage inequality increased? Trade can explain part of the rising wage gap. The US is abundant in skilled labor and scarce in unskilled labor (see table 3.6 in the next slide). According to the Stolper-Samuelson theorem, trade benefits the abundant factor and harms the scarce factor. 33
Image of page 33
34
Image of page 34

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

View Full Document Right Arrow Icon
Skilled work, without a worker While the many robots in auto factories typically perform only one function, in the new Tesla factory in Fremont, Calif., a robot might do up to four: welding, riveting, bonding and installing a component. (Source: New York Times,8/18/2012) 35
Image of page 35
Skilled work, without a worker Robot arms like those at a Philips Electronics factory in the Netherlands can perform the same tasks as hundreds of low-skill workers. (source: New York Times,8/18/2012) 36
Image of page 36

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

View Full Document Right Arrow Icon
A Robot With a Reassuring Touch REFINEMENT IN MOTION: Robotics designers seek to have their machines emulate human gestures and positions. (source: New York Times, 9/18/2012) 37
Image of page 37
Opinions Toward Free Trade A survey was conducted in the U.S. by the National Elections Studies (NES) in 1992 to see how citizens viewed trade. Respondents could either answer that they favor placing limits on imports, not supporting free trade, or they could oppose limits on imports, supporting free trade. How do these answers compare with characteristics of the respondents, such as their wages, skills, or the industries they work in? 38
Image of page 38

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

View Full Document Right Arrow Icon
Opinions Toward Free Trade A much more important determinant of the attitudes toward free trade is the skill level of workers, measured by wages or years of education. Workers with lower wages or fewer years of education are more likely to favor import restrictions. Those with higher wages and more years of education favor free trade. This is consistent with the prediction of the Stolper- Samuelson Theorem. 39
Image of page 39
Factor Price Equalization a) The US Q of aircrafts, QA Q of shoes, QS PPF A B Q of aircrafts, QA Q of shoes, QS B* A* b) China Specialization causes U.S. to increase the demand for capital and China to increase the demand for labor. As a result, the price of capital rises in U.S.
Image of page 40

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

View Full Document Right Arrow Icon
Image of page 41
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    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.

    Student Picture

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

  • Left Quote Icon

    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.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    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.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern