Specific-factors Model

Question 1

What is the main idea in this model?

Answer 1

Some factors are immobile and tied to specific sectors, affecting trade patterns and income distribution

(Visas faktorer är orörliga)

Question 2

What production factors are there in this model?

Answer 2

Mobile labor and specific factors (tied to sectors)

Question 3

How is the PPC in this model?

Answer 3

Bowed outwards (increasing opportunity cost)

Question 4

What are the gains from trade in this model?

Answer 4

Reallocation of resources to the sectors benefiting from relative price changes.

Question 5

Are there income distribution effects in this model?

Answer 5

Yes, specific factors (land) are affected differently based on price changes.

Capital and land in export benefits but disadvantage in import
(Labor is mobile and does not really get affected)

Question 6

What trade patterns are explained in this model?

Answer 6

Short-term trade patterns based in sector-specific factors

Question 7

When is this model used?

Answer 7

To study short-term effects of trade, such as how price changes affect income distribution

Question 8

Give an example of this model

Answer 8

A price increase for cloth leads to labor and capital shifting into the cloth sector at the expense of others

Question 9

What key assumptions are there in this model?

Answer 9

Labor is mobile (rörlig) between sectors, but specific factors (capital/land) are immobile

Question 10

What does this model say about the effects of trade in the short run?

Answer 10

Factors specific to export sectors benefit from trade, while factors specific to import-competing sectors lose