International Economics Who Gains and Who Loses from Trade 07/11/61 Session 5 Who Gains and Who Loses from Trade Aj. Noom (anuphak@gmai.com) Tel.0835426434

Who Gains and Who Loses within A Country Without trade, a country is more likely to produce both products so as to fulfill the domestic demand.

With trade, a country is more likely to produce the products in which it has intensive resources to produce it (Hecstecher – Ohlin Approach). Export Import

Short-run Effect of Opening Trade Land-intensive Country (The United State) Rent Wage Rent Wage

The Long-run Factor-price Response Rent Wage Short-run Land-intensive Country (The United State) Rent Wage Rent Wage Meanwhile Rent Wage Rent Wage Long-run

Short-run Effect

Land-intensive country Labor-intensive country

The ratio is still the same. Why not 100% shift (53 for land use & 100 for labor use) ?

International Factor Price Equalization With trade, the cost of resources in each country becomes more similar, which then induce similar price among countries. Example : (Labor) the labor-scarce country the labor-abundant country No trade High wage Low wage With trade Import put the wage down Export pull the wage up

What happen to the price when China open the country ? Airbus Boeing Comac

This table is consistent with the H-O theory. Factor Endowments e.g., factory & machine This table is consistent with the H-O theory.

What this graph really mean ? How it relate to the H-O theory ?

The U.S. Pattern