1. International Economics Who Gains and Who Loses from Trade
07/11/61
Session 5
Who Gains and Who Loses from Trade
Aj. Noom Tel

2. 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.

3. 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

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

5. 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

6. Short-run Effect

7. Land-intensive country
Labor-intensive country

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

9. 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

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

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

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

14. The U.S. Pattern