GMS Power Grid Who gains, who loses? Chuenchom Sangarasri Greacen 17 July 2005 Piyawan Resort.
Chapter 5 Who gains and who loses from trade? Also will look at Appendix B. Link to syllabus.
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Transcript of Chapter 5 Who gains and who loses from trade? Also will look at Appendix B. Link to syllabus.
Chapter 5 Who gains and who loses from trade?
Also will look at Appendix B.
Link to syllabus
Figure 5.1 page 71 How free trade affects income distribution
Figure 5.2 page 72Effects of Free Trade: Short run versus Long Run
Stolper Samuelson Theorem (p. 72)
An event that changes (relative) product prices will raise the return of the factor used intensively in the rising price industry, and lower it for the other factor.
Specialized Factor pattern: The more a factor is specialized, the more it stands to gain (or lose) from a change in the (relative) product price.
Stolper and Samuelson, in AA, ~1990
Internationa
l Factor Price Equalization •
With the shift
to free trade: For each factor, its rate of return becom
es more sim
ilar between
countries. Under ideal
conditions, the factor’s real rate of return is the sam
e in different countries.
•Exam
ple: Labor.
With no trade, the w
age rate is high in the labor-scarce country (e.g., U
S). The wage
rate is low in the labor-
abundant country (R.o.W.).
With free trade, the im
port of labor-intensive products pushes the w
age rate down in
the labor-scarce country (e.g. U
S). The export of labor-intensive products pulls the w
age rate up in the labor-abundant country (R.o.W
.).
Figure 5.3 page 77Shares of the world’s factor endowments, 2007-2010
Figure 5.4 page 80. U.S. trade: consistent with H-O Theory?
Figure 5.5 page 84. Schematic View of Factor Content of U.S. Exports
Figure 5.6 page 85Factor content of Canada’s exports
China: Value of Exports and Imports, 1976-2006 p. 83
China’s Exports and Imports, 2009. p. 82
Land/Labor and Wage/Rent Ratios, 1870-1940.Great Britain, Egypt, Thailand, and Uruguay
Source: Williamson, NBER #7784
Land/Labor Wage/Rent
1870 19401870 1940
EYE ON THE GLOBAL ECONOMY
Back to list
Bade/ParkinP. 241
Persistent Gaps or Convergence?
EYE ON THE GLOBAL ECONOMY
Back to list
Bade/ParkinP. 241
Very interesting
Persistent Gaps or Convergence?
Gini Coefficient of Income Inequality in the U.S.
2010
2007
2004
(35)
2001
1998
1995
(25)
1992
(22)
1989
1986
1983
(19)
1980
1977
1974
(16)
(15)
1971
(13)
1968
1965
(10)
1962
(9)
1959
1956
1953
1950
1947
(5)
0.30
0.33
0.35
0.38
0.40
0.43
0.45
0.48
0.50
Inequality in US
Gini
Source: US Gov’t http://www.census.gov/hhes/www/income/data/historical/families/index.html
Sala-I-Martin 4
Global Income Inequality, using Gini Coefficient
Sala-I-Martin’s Estimates
China
India
US
QJE 2006
Sala-I-Martin 2
World Distribution of Income
World Income Inequality 1970-2000
Source: Sala-i-MartinQJE 2006
Regional Poverty Rates 1970-2000
Source: Sala-i-Martin QJE (2006)
Suggested reading in Chapter 5 (p. 88).Names from UM-Ann Arbor campus
Figure B.1 page 670 Production Functions with Fixed Factor Proportions
Figure B.2 page 671Edgeworth Bowley Box Diagram: Fixed factor proportions
Figure B.3 Page 671Production Possibility Curve, Fixed Factor Proportions
Both curves together p. 671
Figure B.4 page 672PPC Curve with constant opportunity costs
Figure B.5 page 673 Variable factor proportions
Question page 89.
Question 10 p. 90
Sala-I-Martin’s Estimates
Sala-I-Martin 3