CH03 Specific Factors and Income Distribution(国际经济学-厦门大学 陈涛)讲解材料.ppt

Trade and Relative Prices Suppose that Japan has more capital per worker than America, while America has more land per worker than Japan. As a result, the pretrade relative price of manufactures in Japan is lower than the pretrade relative price in America. International trade leads to a convergence of relative prices. International Trade in the Specific Factors Model Relative quantity of manufactures, QM/QF Relative price of manufactures, PM /PF (PM /PF )W (PM /PF )A (PM /PF )J International Trade in the Specific Factors Model Figure 3-11: Trade and Relative Prices RDWORLD RSA RSWORLD RSJ The Pattern of Trade In a country that cannot trade, the output of a good must equal its consumption. International trade makes it possible for the mix of manufactures and food consumed to differ from the mix produced. A country cannot spend more than it earns. International Trade in the Specific Factors Model Budget constraint (slope = -PM/PF) Consumption of manufactures, DM Output of manufactures, QM Consumption of food, DF Output of food, QF Production possibility curve International Trade in the Specific Factors Model Figure 3-12: The Budget Constraint for a Trading Economy Q1M 1 Q1F QJF QAF DAF DJF QAM DAM QJM DJM Japan’s food imports America’s food exports Japan’s manufactures exports America’s manufactures imports Quantity of manufactures Quantity of manufactures Quantity of food Quantity of food Japanese budget constraint American budget constraint International Trade in the Specific Factors Model Figure 3-13: Trading Equilibrium Income Distribution and the Gains from Trade To assess the effects of trade on particular groups, the key point is that international trade shifts the relative price of manufactures and food. Trade benefits the factor that is specific to the export sector of each country, but hurts the factor that is specific to the import-competing sectors. Trade has ambiguous effects on mobile factors. Could those who gain from trade