Chapter_3_The_Heckscher-Ohlin_Model

51 long run effects of immigration on factor prices

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Long-run Effects of Immigration on Factor Prices Given the constant world prices of shoes and computers, the change in outputs in the Rybczynski Theorem goes hand-in-hand with the finding that wage and rental will not change due to the increase in labor (or capital). That is because the economy can absorb the extra amount of labor by changing output. 52
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An Application of the Rybczynski Theorem We will examine the effects of the Mariel Boatlift of 1980 on the Miami labor market. The Mariel immigrants increased the Miami labor force by 7%, and the percentage increase in labor supply to less-skilled occupations and industries was even greater because most of the immigrants were relatively unskilled. Nevertheless, the Mariel influx appears to have had virtually no effect on the wages or unemployment rates of less-skilled workers, even among Cubans who had immigrated earlier. 53
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The Effects of the Mariel Boat Lift on Industry Output in Miami The next slide shows real value added in the apparel industry for Miami and the average of comparison cities. Real value added measures the payments to labor and capital in an industry corrected for inflation. A way to measure the output of the industry. We adjust for city size by looking at value added per capita. The industry decline in Miami is slightly slower than in comparison cities after 1980. Some evidence of the Rybczynski Theorem. 54
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The Effects of the Mariel Boat Lift on Industry Output in Miami 55
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The Effects of the Mariel Boat Lift on Industry Output in Miami The next slide shows the output of a group of skill-intensive industries. These industries fell more rapidly in Miami after 1980. This could also be some evidence of the Rybczynski Theorem although there was also some decline in population of some more skilled workers at that point as well. 56
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The Effects of the Mariel Boat Lift on Industry Output in Miami 57
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Long-run Effects of Immigration on Wages in Miami Wages did not really change during this time. Is this also from the Rybczynski Theorem? During this time, computer use in manufacturing was increasing significantly. This increase was much slower in Miami than in similar cities. One explanation is that firms employed the Mariel refugees and other low-skilled workers rather than switching to computer technologies. This is just another example of how the refugees could be absorbed across many industries. 58
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Conclusions The HO framework is one of the most widely used models in explaining trade patterns. It isolates the effect of different factor endowments across countries and determines the impact of these differences on trade patterns, relative prices, and factor returns. By focusing on the factor intensities among goods, the HO model also provides clear guidance as to who gains and who loses from trade. 59
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Conclusions The HO model predicts real gains for the factor used intensively in the export good, whose relative price goes up with the opening of trade, and real losses for the other factor. 60
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