克鲁格曼国际经济学(第六版)的教师手册(含习题答案)imch03

CHAPTER 3 Specific Factors and Income Distribution Chapter Organization The Specific Factors Model Assumptions of the Model Box: What is a Specific Factor? Production Possibilities Prices, Wages, and Labor Allocation Relative Prices and the Distribution of Income International Trade in the Specific Factors Model Resources and Relative Supply Trade and Relative Prices The Pattern of Trade Income Distribution and the Gains From Trade The Political Economy of Trade: A Preliminary View Optimal Trade Policy Box: Specific Factors and the Beginnings of Trade Theory Income Distribution and Trade Politics Summary Appendix: Further Details on Specific Factors Marginal and Total Product Relative Prices and the Distribution of Income Chapter Overview The analysis presented in the previous chapter, demonstrating unambiguous gains from trade, may leave students wondering why free trade is such a politically charged issue and why protectionism is so heatedly discussed in the press. The reason for this is that the debates concerning free trade focus on its distributional rather than its efficiency effects. A formal examination of these effects requires a model which has factors of production linked to producing certain goods. Two models of this nature are presented in this chapter. The first model includes factors of production which are inexorably tied to producing one and only one good. The particular example presented in the text involves winemakers and cheesemakers. The immobility of labor prevents equalization of wages. The production possibility frontier of this economy is a rectangle and the relative supply curve is a vertical line. An equilibrium relative price can be determined when the relative demand curve is specified. Consider the effect of introducing another country which can produce the same bundle of goods. The second economy shares the same production technology, but has different relative amounts of each type of labor. Trade between these two economies benefits each in the aggregate since the possible consumption set of each country expands. However, distributional issues arise when trade is permitted since workers in particular sectors may not gain from trade. There will be no gain for the labor in each economy which was relatively scarce prior to trade as compared to after trade. The type of labor relatively abundant in a country will gain from trade. The source of this effect is the movement in relative prices which favors the good which was relatively abundant in each country before trade. The general outcome is that trade benefits workers in the export sector of each country and hurts workers in the import-competing sector. Next, a more general model is presented to investigate the distributional effects of trade. This specific factors model allows an examination of the distributional effects of trade on factors inexorably tied to the production of a specific good as well as on a factor that can be used to produce either good. The three factors in this model include two specific factors, land and capital, as well as one inter-sectorally mobile factor, labor. The fixed amount of each specific factor results in diminishing returns to labor. The mobility of labor ensures an equal wage in the production of either good, and perfect competition ensures that the wage equals the value marginal product of labor in the production of each good. A graphical analysis demonstrates the distribution of labor between sectors as well as the return to labor. International trade alters the relative prices of goods and thus the amount of labor used in each sector, the real wage to labor and the returns to capital and land. The results of this model are similar to that of the immobile factors model in that owners of factors specific to export sectors in from trade while owners of factors specific to import sectors lose from trade. This model also shows that trade has an ambiguous effect on mobile factors. To reinforce the importance of these concepts, the instructor may present data on who lobbies for protection and in which industries. Newspapers and magazines are often useful and timely sources of relevant information. The models presented in this chapter provide a framework for a preliminary discussion of the political economy of trade. The general support for free trade among economists despite its income distributional effects is justified. One reason for this support is that the benefits of free trade are widely dispersed while its costs are concentrated. Economists may better serve the country as advocates for the general welfare since there is no shortage of advocates for particular groups injured by trade. The issue of the political economy of trade reappears throughout the book. An appendix provides further details on the specific factors model. Answers to Textbook Problems 1. Texas and Louisiana are states with large oil-producing sectors. The real wage of oil-producing factors of production in terms of other goods falls when the price of oil falls relative to the price of other goods. This was the source of economic decline in these states in 1986. 2. To analyze the economy's production possibility frontier, consider how the output mix changes as labor is shifted between the two sectors. a. The production functions for goods 1 and 2 are standard plots with quantities on the vertical axis, labor on the horizontal axis, and Q1= Q1(K1,L1) with slope equal to the MPL1, and on another graph, Q2= Q2(K2,L2) with slope equal to the MPL2. Figure 3-1 b. To graph the production possibilities frontier, combine the production function diagrams with the economy's allocation of labor in a four quadrant diagram. The economy's PPF is in the upper right hand corner, as is illustrated in the four quadrant diagram above. The PPF is curved due to declining marginal product of labor in each good. 3. a. To solve this problem, one can graph the demand curve for labor in sector 1, represented by (w=MPL1=demand for L1) and the demand curve for labor in sector 2, represented by (w=MPL2=demand for L2) . Since the total supply of labor is given by the horizontal axis, the labor allocation between the sectors is approximately L1=27 and L2=73. The wage rate is approximately $0.98. Figure 3-2 b. Use the same type of graph as in problem 2b to show that sectoral output is Q1=44 and Q2=90. (This involves combining the production function diagrams with the economy's allocation of labor in a four quadrant diagram. The economy's PPF is in the upper right hand corner, as illustrated in the text.) c. Use a graph of labor demands, as in part a, to show that the intersection of the demand curves for labor occurs at a wage rate approximately equal to $0.74. The relative decline in the price of good 2 caused labor to be reallocated: labor is drawn out of production of good 2 and enters production of good 1 (L1=62, L2=38). This also leads to an output adjustment, whereby production of good 2 falls to 68 units and production of good 1 rises to 76 units. d. With the relative price change from p2/p1=2 to p2/p1=1, the price of good 2 has fallen by 50 percent, while the price of good 1 has stayed the same. Wages have fallen, but by less than the fall in p2 (wages fell approximately 25 percent). Thus, the real wage relative to p2 actually rises while to real wage relative to p1 falls. Hence, to determine the welfare consequences for workers, information is needed about their consumption shares of good 1 and good 2. 4. The box diagram presented below is a useful tool for showing the effects of increasing the supply of the mobile factor of production, labor. a. For an economy producing two goods, X and Y, with labor demands reflected by their marginal revenue product curves, there is an initial wage of w1 and an initial labor allocation of Lx=OxA and Ly=OyA. When the supply of labor increases, the right boundary of this diagram is pushed out to Oy'. The demand for labor in sector Y is pulled rightward with the boundary. The new intersection of the labor demand curves shows that labor expands in both sectors, and therefore output of both X and Y also expand. The relative expansion of output is ambiguous. Wages paid to workers fall. Figure 3-3 b. From the shape of the MPL curves, it is clear that labor will continue to exhibit diminishing returns. Using a four quadrant diagram, you can demonstrate that the new production possibility frontier is more concave and steeper (flatter) at the ends. Using the numerical example, L1 increases to 90 from 62 and L2 increases to 50 from 38. Wages decline from $0.74 to $0.60. This new allocation of labor yields a new output mix of approximately Q1=85 and Q2=77. Further Reading Avinash Dixit and Victor Norman. Theory of International Trade. Cambridge: Cambridge University Press, 1980. Michael Mussa. "Tariffs and the Distribution of Income: The Importance of Factor Specificity Substitutability and Intensity in the Short and Long Run." Journal of Political Economy 82 (1974) pp.1191-1204. J. Peter Neary. "Short-Run Capital Specificity and the Pure Theory of International Trade." Economic Journal 88 (1978) pp.488-510. Mancur Olson. The Logic of Collective Action. Cambridge: Harvard University Press, 1965. David Ricardo. The Principles of Political Economy and Taxation. Homewood Illinois: Irwin, 1963. PAGE 19 _1078206546.doc Q1 L2 L1 PF1 slope= -1 slope= -1/2 100 100 100 PF2 PPF Q1 _1078206907.doc Ox A B 1 2 Oy’ Oy PyMPLy w1 w2 PxMPLx _996611994.doc L w p2xMPL2 p1xMPL1 0 27 100 L1 L2 $1.00