international economics 03/01/20 copy right 1 specific factors and income distribution 1.the...
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第 页03/01/20 绍兴文理学院经管学院 COPY RIGHT
（三） Specific Factors and Income Distribution
1.The Specific Factors Model
2.International Trade in the Specific Factors Model
3.Income Distribution and the Gains from Trade
4.The Political Economy of Trade: A Preliminary View
5.Summary
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1.The Specific Factors Model
(1).Assumptions of the Model
(2).Box: What is a Specific Factor?
(3).Production Possibilities
(4).Prices, Wages and Labor Allocation
(5).Relative Prices and the Distribution of Income
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(1). Assumptions of the Model
• Imagine an economy
①.produce two goods:
manufactures and food
②.three factors of production:
labor (L), capital (K), and land (T for terrain)
③.perfectly competition
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• How much does the economy produce?
• Production function
QM=QM(K,LM), (3-1)
QF=QF(T,LF), (3-2)
LM+LF=L. (3-3) where QM 、 QF: output of manufactures and food
K: capital stock T: supply of land
LM 、 LF: the labor force employed in manufactures and food
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(2).Box: What is a Specific Factor?
• A Specific Factor is a factor that is specific to
particular uses.
e.g. land, capital
• A mobile factor is a factor that can move
between sectors.
e.g. labor
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(3) Production Possibilities
• First, representing the production functions(3-
1) and(3-2),
• Then, putting them together to derive the
production possibility frontier.
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Figure 3-1 The Production Function for Manufactures
Output, Qm
Laborinput, LM
QM=QM(K,LM)
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Figure 3-2 The Marginal Product of Labor
Marginal productof labor, MPLM
Laborinput, LM
MPLM
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Figure 3-3 The Production Possibility Frontier in the Specific Factor Model
QF
LM
QM
LF
PP
AA
L
L QM=QM(K,LM)
QF=QF(T,LF
)
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3
1’2’
3’
LM2
QM2
QF2
LF2
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Notice:
output of input of output of
food labor manufactures
MPLF 1 MPLM
MPLF/MPLM 1/MPLM 1
So, Slope of production possibilities curve=- MPLF/MPLM
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(4).Prices, Wages and Labor Allocation
LM LF
1w1
Wage rate
PF×MPLF
PM×MPLM
LM1 LF
1
Figure 3-4 the allocation of labor
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MPLM×PM=w (3-4)
MPLF×PF=w (3-5)
LM+LF=L (3-6)
Equations(3-4)and(3-5)imply that
MPLM×PM= MPLF×PF=w
or, - MPLF/MPLM =-PM/PF (3-7)
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Figure 3-5 Production in the Specific Factors Model
QM
QF
QF1
QM1
1
Slope=-(PM/PF)1
PP
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Figure 3-6 An Equal Proportional Increase in the Prices of Manufactures and Food
LM LF
2
w1
Wage rate PF
2×MPL
F
PM1×MPL
M
PF1×MPLF
PM2×MPL
F
w2
1
PF increases 10%
PM increases 10%
w
10% wage increase
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Figure 3-7 A Rise in the Price of Manufactures
w1Wage rate rises by
less than 7%
LM LF
1
Wage rate
PF1×MPLF
PM1xMPL
M
PM2xMPL
M
w2
Amount of labor shifted from food to manufactures
2
15
w1
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Figure 3-8 The Response of Output to a Change in the Relative Price of Manufactures
QF
QM
Slope=-(PM/PF)1
Slope=-(PM/PF)2
1
2
QF1
QF2
QM1
QM2
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Figure 3-9 Determination of Relative Prices
RS
RD
1
PM/PF
(PM/PF)1
(QM/QF)1
QM/QF 返回
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Question:
Explain how the opening of trade can lead to an increase in money wages in a capital-abundant country if capital is immobile between sectors. Does this mean that labor is necessarily better off with trade?
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(5).Relative Prices and the Distribution of Income
If relative price rise by 10%, wage rate rise only by 5%
then
workers: uncertainty
owners of capital: definitely better off
owners of land: definitely worse off
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2.International Trade in the Specific Factors Model
• (1).Resources and Relative Supply
• (2).Trade and Relative Prices
• (3).The Pattern of Trade
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(1).Resources and Relative Supply
LM LF
1
Wage rate, w
PF1×MPLF
PM1xMPL
M
PM2xMPL
M
w
Amount of labor shifted from food to manufactures
2
w
K
Figure 3-10 Changing the Capital Stock
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(2).Trade and Relative Prices
PM/PF
(PM/PF)A
(PM/PF)WORLD(PM/PF)J
QM/QF
RDWORL
D
RSJ
RSWORL
D
RSA
Figure 3-11 Trade and Relative Prices
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(3).The Pattern of Trade PM×DM+PF×DF=PM×QM+PF×QF (3-
8)Rearranging: DF-QF=(PM/PF)×(QM-DM) (3-
9) DF
QF
QF1
Q
M1
DM
QM
1
PP
Budget constraint
Figure 3-12 The Budget
Constraint for a Trading Economy
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Figure 3-13 Trading Equilibrium
QF QF
QFJ
QMQM
DFJ
DMJQMJ
QFADFA
QMA
DMA
(a) Japan (b) America
Japanese budget constraint
American budget constraint
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3.Income Distribution and the Gains from Trade
Trade benefits the factor that is specific to the export sector of each country but hurts the factor specific to the import-competing sectors, with ambiguous effects on mobile factors.
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Figure 3-14 Trade Expands the Economy’s Consumption Possibilities
DF
QF
QF1
Q
M1
DM
QM
1
PP
Budget constraint2
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4.The Political Economy of Trade: A Preliminary View
(1).Optimal Trade Policy
Box: Specific Factors and the
Beginnings of Trade Theory
(2).Income Distribution and Trade
Politics
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(1).Optimal Trade Policy
Three main reasons:• It’s not specific• It’s always better to allow trade and
compensate those who are hurt by it• Those who stand to lose are typically
better organized
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(2).Income Distribution and Trade Politics
Typically, those who gain from trade in any particular product are a much less concentrated, informed, and organized group than those who lose.
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5.Summary
• This chapter builds upon the insig-hts from chapter 2 by developing tra-de models which allow countries to p-roduce goods when production requires more than one factor of production.
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• One important reason for this add-ition to the model is that this more general framework highlights the eff-ects of trade on income distribution.
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• The first model presented includes factors of production which are spec-ific to the production of each of two goods.
• Then, a more general model is intr-oduced, with this latter model allow-ing for both mobile and specific fac-tors of production.
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• This extension provides an even ri-cher analysis of the income distribu-tion effects of trade.
• These models set the stage for an initial discussion of the political economy of trade and for justifying economist’s support of the principl-es of free trade among nations.
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