Chapter 5 Who gains and who loses from trade?

1. Chapter 5 Who gains and who loses from trade? Also will look at Appendix B. Link to syllabus

2. Figure 5.1 page 71 How free trade affects income distribution

3. Figure 5.2 page 72Effects of Free Trade: Short run versus Long Run

4. 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.

5. Stolper and Samuelson, in AA, ~1990

6. International Factor Price Equalization • With the shift to free trade: For each factor, its rate of return becomes more similar between countries. Under ideal conditions, the factor’s real rate of return is the same in different countries. • Example: Labor. • With no trade, the wage rate is high in the labor-scarce country (e.g., US). The wage rate is low in the labor-abundant country (R.o.W.). • With free trade, the import of labor-intensive products pushes the wage rate down in the labor-scarce country (e.g. US). The export of labor-intensive products pulls the wage rate up in the labor-abundant country (R.o.W.).

7. Figure 5.3 page 77Shares of the world’s factor endowments, 2007-2010

9. Figure 5.4 page 80. U.S. trade: consistent with H-O Theory?

10. Figure 5.5 page 84. Schematic View of Factor Content of U.S. Exports

11. Figure 5.6 page 85Factor content of Canada’s exports

12. China: Value of Exports and Imports, 1976-2006 p. 83

13. China’s Exports and Imports, 2009. p. 82

14. Land/Labor and Wage/Rent Ratios, 1870-1940.Great Britain, Egypt, Thailand, and Uruguay Land/Labor Wage/Rent 1870 1940 1870 1940 Source: Williamson, NBER #7784

15. Back to list Bade/Parkin P. 241 EYE ON THE GLOBAL ECONOMY Persistent Gaps or Convergence?

16. Back to list Bade/Parkin P. 241 EYE ON THE GLOBAL ECONOMY Persistent Gaps or Convergence? Very interesting

17. Gini Coefficient of Income Inequality in the U.S. Source: US Gov’t http://www.census.gov/hhes/www/income/data/historical/families/index.html

18. Sala-I-Martin 4Global Income Inequality, using Gini Coefficient

19. Sala-I-Martin’s Estimates QJE 2006 China India US

20. Sala-I-Martin 2

21. World Distribution of Income

22. World Income Inequality 1970-2000 Source: Sala-i-Martin QJE 2006

23. Regional Poverty Rates 1970-2000 Source: Sala-i-Martin QJE (2006)

24. Suggested reading in Chapter 5 (p. 88).Names from UM-Ann Arbor campus

25. Figure B.1 page 670 Production Functions with Fixed Factor Proportions

26. Figure B.2 page 671EdgeworthBowley Box Diagram: Fixed factor proportions

27. Figure B.3 Page 671Production Possibility Curve, Fixed Factor Proportions

28. Both curves together p. 671

29. Figure B.4 page 672PPC Curve with constant opportunity costs

30. Figure B.5 page 673 Variable factor proportions

31. Question page 89.

32. Question 10 p. 90

34. Sala-I-Martin’s Estimates

35. Sala-I-Martin 3