Handbook of international trade Vol 1 by Eun Kwan Choi; James Harrigan

By Eun Kwan Choi; James Harrigan

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Suppose, now, that each sector uses a type of labor that has a unique level of skills. In particular, let the first industry use unskilled labor and capital as inputs, and the second industry use skilled labor and (the same kind of) capital. Off stage suppose there is an educational process whereby the unskilled can be converted to skilled. This is like a change in factor endowments. Assuming commodity prices are constant, what is the effect of such training on the wage rates of the two types of labor?

However, long-run industry output is indeterminate and the long-run supply curve is horizontal,7 pi = gi (w, r ) = aLi (w, r )w + aKi (w, r )r . Implications of Many Industries in the Heckscher–Ohlin Model 39 Given an arbitrary capital allocation, K = (K1, K2, . . 6). Producers earn duction costs. Thus, in each industry, competitive firms have no incentive either to enter or exit the market. However, this does not mean that the output vector is unique in the long run. Another capital allocation K ¢ will yield a different output ¯ vector, which also will be consistent with the given output prices.

Jones, and W. ), General Equilibrium, Growth, and Trade II: The Legacy of Lionel McKenzie, San Diego: Academic Press, 429–41. Kemp, Murray C. and Leon Wegge 1969: On the relation between commodity prices and factor rewards. International Economic Review, 10, 407–13. Leontief, Wassily 1953: Domestic production and foreign trade: The American capital position re-examined. Proceedings of the American Philosophical Society, 97, 332–49. Minabe, Nobuo 1967: The Stolper–Samuelson theorem, the Rybczynski effect, and the Heckscher–Ohlin theory of trade pattern and factor price equalization: The case of the many-commodity, many-factor country.

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