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International Economics Who Gains and Who Loses from Trade
07/11/61 Session 5 Who Gains and Who Loses from Trade Aj. Noom Tel
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Who Gains and Who Loses within A Country
Without trade, a country is more likely to produce both products so as to fulfill the domestic demand.
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With trade, a country is more likely to produce the products in which it has intensive resources to produce it (Hecstecher – Ohlin Approach). Export Import
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Short-run Effect of Opening Trade
Land-intensive Country (The United State) Rent Wage Rent Wage
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The Long-run Factor-price Response
Rent Wage Short-run Land-intensive Country (The United State) Rent Wage Rent Wage Meanwhile Rent Wage Rent Wage Long-run
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Short-run Effect
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Land-intensive country
Labor-intensive country
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The ratio is still the same.
Why not 100% shift (53 for land use & 100 for labor use) ?
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International Factor Price Equalization
With trade, the cost of resources in each country becomes more similar, which then induce similar price among countries. Example : (Labor) the labor-scarce country the labor-abundant country No trade High wage Low wage With trade Import put the wage down Export pull the wage up
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What happen to the price when China open the country ?
Airbus Boeing Comac
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This table is consistent with the H-O theory.
Factor Endowments e.g., factory & machine This table is consistent with the H-O theory.
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What this graph really mean ? How it relate to the H-O theory ?
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The U.S. Pattern
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