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

Figure 5.1 page 71 How free trade affects income distribution

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

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.

Stolper and Samuelson, in AA, ~1990

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.).

Figure 5.3 page 77 Shares of the world’s factor endowments,

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

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

Figure 5.6 page 85 Factor content of Canada’s exports

China: Value of Exports and Imports, p. 83

China’s Exports and Imports, p. 82

Land/Labor and Wage/Rent Ratios, Great Britain, Egypt, Thailand, and Uruguay Source: Williamson, NBER #7784 Land/Labor Wage/Rent

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

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

Gini Coefficient of Income Inequality in the U.S. Source: US Gov’t

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

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

Sala-I-Martin 2

World Distribution of Income

World Income Inequality Source: Sala-i-Martin QJE 2006

Regional Poverty Rates Source: Sala-i-Martin QJE (2006)

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

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

Figure B.2 page 671 Edgeworth Bowley Box Diagram: Fixed factor proportions

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

Both curves together p. 671

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

Figure B.5 page 673 Variable factor proportions

Question page 89.

Question 10 p. 90

Sala-I-Martin’s Estimates

Sala-I-Martin 3