Vecka 1 Sammanfattningar del 2 Flashcards
Why is it often that the actual politics of trade policy doesn´t always want to trade?
Because those who lose from trade are usually a much more informed, cohesive, and organized group than those who gain and they influence the politicians via lobbying.
What can we do to understand the role of resources in trade?
Use a model in which two goods are produced using two factors of production.
What does the labour movement between countries do?
Raise total world output and generates strong income distribution effects, so that some groups are hurt as a result.
What does the two goods differ in?
Their factor intensity; that is, at any given wage-rental ratio, production of one of the goods will use a higher ratio of capital to labor than production of the other.
What happens if there is a rise in the relative price of the labor-intensive good?
The distribution of income will shift in favor of labor and will do so very strongly: The real wage of labor will rise in terms of both goods, while the real income of capital owners will fall in terms of both goods.
What can an increase in the supply of one factor of production do?
Expand production possibilities, but in a strongly biased way.
How is the expand production possibilities biased?
At unchanged relative goods prices, the output of the good intensive in that factor rises while the output of the other good actually falls.
What is the basic Heckscher-Ohlin theory of trade?
Countries tend to export goods that are intensive in the factors with which they are abundantly supplied.
What does it mean that a country is abundant in a resource?
That it has a large supply of that resource relative to its supply of other resources.
Why does international trade have strong income distribution effects?
Trade changes relative prices and changes in relative prices of goods have very strong effects on the relative earnings of resources.
What could according to empirical evidence explain rising wage inequality in developed countries?
Technological change rewarding worker skill.
Why is there not complete factor-price equalization in all the countries when they trade things between eachother?
Because of:
- Wide differences in resources,
- barriers to trade,
- international differences in technology.
What does the world relative supply and demand curves determine?
The price of exports relative to imports, a country’s terms of trade.
What does The standard trade model derive?
A world relative supply curve from production possibilities and a world relative demand curve from preferences.
What is the Heckscher-Ohlin model good at?
Predicting the pattern of trade between developed and developing countries.
