1、YOU ARE WELCOME !1International Economics國際經濟學主講：余道先ydxdhy2Chapter 3Specific Factors and Income Distribution特定要素和收入分配3IntroductionThe Specific Factors Model（特定要素模型）International Trade in the Specific Factors Model（特定要素模型中的國際貿易）Income Distribution and the Gains from TradeThe Political Economy of Trad

2、e: A Preliminary View（貿易中的政治經濟學）SummaryPreview4IntroductionTrade has substantial effects on the income distribution within each trading nation.There are two main reasons why international trade has strong effects on the distribution of income:Resources cannot move immediately or costlessly from one

3、industry to another.Industries differ in the factors of production they demand.The specific factors model allows trade to affect income distribution.5Assumptions of the ModelAssume that we are dealing with one economy that can produce two goods, manufactures and food.There are three factors of produ

4、ction; labor (L), capital (K) and land (T for terrain).Manufactures are produced using capital and labor (but not land).Food is produced using land and labor (but not capital). Labor is therefore a mobile factor that can be used in either sector.Land and capital are both specific factors that can be

5、 used only in the production of one good.Perfect Competition prevails in all markets.The Specific Factors Model6How much of each good does the economy produce?The economys output of manufactures depends on how much capital and labor are used in that sector.This relationship is summarized by a produc

6、tion function.The production function for good X gives the maximum quantities of good X that a firm can produce with various amounts of factor inputs.For instance, the production function for manufactures (food) tells us the quantity of manufactures (food) that can be produced given any input of lab

7、or and capital (land).The Specific Factors Model7The production function for manufactures is given by QM = QM (K, LM) (3-1)where:QM is the economys output of manufacturesK is the economys capital stockLM is the labor force employed in manufacturesThe production function for food is given by QF = QF

8、(T, LF) (3-2)where:QF is the economys output of foodT is the economys supply of landLF is the labor force employed in foodThe Specific Factors Model8The full employment of labor condition requires that the economy-wide supply of labor must equal the labor employed in food plus the labor employed in

9、manufactures:LM + LF = L (3-3)We can use these equations and derive the production possibilities frontier of the economy.The Specific Factors Model9Production PossibilitiesTo analyze the economys production possibilities, we need only to ask how the economys mix of output changes as labor is shifted

10、 from one sector to the other.Figure 3-1 illustrates the production function for manufactures.The Specific Factors Model10QM = QM (K, LM)Figure 3-1: The Production Function for ManufacturesThe Specific Factors ModelLabor input, LMOutput, QM11The shape of the production function reflects the law of d

11、iminishing marginal returns（邊際報酬遞減）.Adding one worker to the production process (without increasing the amount of capital) means that each worker has less capital to work with.Therefore, each additional unit of labor will add less to the production of output than the last.The Specific Factors Model1

12、2Figure 3-2 shows the marginal product of labor（勞動邊際產品）, which is the increase in output that corresponds to an extra unit of labor.The Specific Factors Model13MPLMFigure 3-2: The Marginal Product of LaborThe Specific Factors ModelLabor input, LM Marginal product of labor, MPLM14QF =QF(K, LF)QM =QM(

13、K, LM)L2ML2F321LLAA13PPEconomys production possibility frontier (PP)Production functionfor manufacturesEconomys allocation of labor (AA)Production functionfor foodQ2FQ2M2Labor input in food, LF (increasing )Output of manufactures, QM (increasing )Labor input in manufactures, LM (increasing )Output o

14、f food, QF (increasing )Figure 3-3: The Production Possibility Frontier in the Specific Factors ModelThe Specific Factors Model15Prices, Wages, and Labor Allocation （價格、工資和勞動配置）How much labor will be employed in each sector?To answer the above question we need to look at supply and demand in the lab

15、or market.The demand for labor in each sector depends on the price of output and the wage rate. In turn, the wage rate depends on the combined demand for labor by food and manufactures.Demand for labor:In each sector, profit-maximizing employers will demand labor up to the point where the value prod

16、uced by an additional person-hour equals the cost of employing that hour.The Specific Factors Model16The demand curve for labor in the manufacturing sector can be written: MPLM x PM = w (3-4)The wage equals the value of the marginal product of labor in manufacturing.The demand curve for labor in the

17、 food sector can be written:MPLF x PF = w (3-5)The wage rate equals the value of the marginal product of labor in food.The Specific Factors Model17The wage rate must be the same in both sectors, because of the assumption that labor is freely mobile between sectors.The wage rate is determined by the

18、requirement that total labor demand equal total labor supply:LM + LF = L (3-6)The Specific Factors Model18PM X MPLM(Demand curve for labor in manufacturing)PF X MPLF(Demand curve for labor in food)Wage rate, WWage rate, WW11L1ML1FTotal labor supply, LLabor used in manufactures, LMLabor used in food,

19、 LFFigure 3-4: The Allocation of LaborThe Specific Factors Model19At the production point the production possibility frontier must be tangent to a line whose slope is minus the price of manufactures divided by that of food.（在生產點上，生產可能性邊界一定和一條斜率等于負的制造品價格除以糧食價格的直線相切）Relationship between relative price

20、s and output: -MPLF / MPLM = -PM / PF(3-7)The Specific Factors Model20Slope = -(PM /PF)11Q1FQ1MOutput of manufactures, QMOutput of food, QFPPFigure 3-5: Production in the Specific Factors ModelThe Specific Factors Model21What happens to the allocation of labor and the distribution of income when the

21、 prices of food and manufactures change（當糧食和制造品的價格發生變化時）?Two cases:An equal proportional change in prices（價格同比例變化）A change in relative prices（相對價格變化）The Specific Factors Model22W1 1PF increases 10%Wage rate, WWage rate, WPF 1 X MPLFLabor used in manufactures, LMLabor used in food, LF10% wage increas

22、ePM increases 10%PM 1 X MPLMW22PF 2 X MPLFPM 2 X MPLMFigure 3-6: An Equal Proportional Increase in the Prices of Manufactures and FoodThe Specific Factors Model23When both prices change in the same proportion, no real changes occur.The wage rate (w) rises in the same proportion as the prices, so rea

23、l wages (i.e. the ratios of the wage rate to the prices of goods) are unaffected. （工資率和價格同比率上升，所以實際工資率（即工資率同產品價格之比）不受影響）The real incomes of capital owners and landowners also remain the same.（資本所有者和土地所有者的實際收入不變）The Specific Factors Model24When only PM rises, labor shifts from the food sector to the

24、manufacturing sector and the output of manufactures rises while that of food falls.The wage rate (w) does not rise as much as PM since manufacturing employment increases and thus the marginal product of labor in that sector falls.（工資率(w) 沒有象 PM 一樣上升得那么多，因為制造業就業上升，則該部門的邊際勞動產出下降。 ）The Specific Factors

25、 Model25PF 1 X MPLFWage rate, WWage rate, WPM 1 X MPLM2W 2Labor used in food, LFLabor used in manufactures, LMAmount of labor shifted from food to manufacturesWage rate rises by less than 7%7% upward shift in labor demandPM 2 X MPLM1W 1Figure 3-7: A Rise in the Price of ManufacturesThe Specific Fact

26、ors Model26PPSlope = - (PM /PF)1Output of manufactures, QMOutput of food, QFSlope = - (PM /PF) 21Q1FQ1M2Q2FQ2MFigure 3-8: The Response of Output to a Change in the Relative Price of ManufacturesThe Specific Factors Model27Relative quantityof manufactures, QM/QFRelative price of manufactures, PM /PF

27、RD RS Figure 3-9: Determination of Relative Prices1 (PM /PF )1 (QM /QF )1 The Specific Factors Model28Relative Prices and the Distribution of IncomeSuppose that PM increases by 10%. Then, we would expect the wage to rise by less than 10%, say by 5%.What is the economic effect of this price increase

28、on the incomes of the following three groups?WorkersOwners of capitalOwners of landThe Specific Factors Model29Workers（不確定）We cannot say whether workers are better or worse off; this depends on the relative importance of manufactures and food in workers consumption.Owners of capital: They are defini

29、tely better off.（受益）Landowners: They are definitely worse off.（受損）The Specific Factors Model30Assumptions of the modelAssume that both countries (Japan and America) have the same relative demand curve.Therefore, the only source of international trade is the differences in relative supply. The relati

30、ve supply might differ because the countries could differ in:TechnologyFactors of production (capital, land, labor)International Trade in the Specific Factors Model31Resources and Relative SupplyWhat are the effects of an increase in the supply of capital stock on the outputs of manufactures and foo

31、d?A country with a lot of capital and not much land will tend to produce a high ratio of manufactures to food at any given prices.International Trade in the Specific Factors Model32PM X MPLM2PF 1 X MPLFWage rate, WWage rate, WPM X MPLM1W 112W 2Increase in capital stock, KAmount of labor shifted from

32、 food to manufacturesLabor used in manufactures, LMLabor usedin food, LFInternational Trade in the Specific Factors ModelFigure 3-10: Changing the Capital Stock33An increase in the supply of capital would shift the relative supply curve to the right.An increase in the supply of land would shift the

33、relative supply curve to the left.What about the effect of an increase in the labor force? The effect on relative output is ambiguous, although both outputs increase.International Trade in the Specific Factors Model34Trade and Relative PricesSuppose that Japan has more capital per worker than Americ

34、a, while America has more land per worker than Japan.As a result, the pretrade relative price of manufactures in Japan is lower than the pretrade relative price in America.International trade leads to a convergence（趨同） of relative prices.International Trade in the Specific Factors Model35Relative qu

35、antity of manufactures, QM/QFRelative price of manufactures, PM /PF (PM /PF )W (PM /PF )A (PM /PF )J International Trade in the Specific Factors ModelFigure 3-11: Trade and Relative PricesRDWORLD RSA RSWORLD RSJ 36The Pattern of TradeIn a country that cannot trade, the output of a good must equal it

36、s consumption. International trade makes it possible for the mix of manufactures and food consumed to differ from the mix produced. A country cannot spend more than it earns. International Trade in the Specific Factors Model37Budget constraint (slope = -PM/PF)Consumption of manufactures, DM Output o

37、f manufactures, QM Consumption of food, DFOutput of food, QFProduction possibility curveInternational Trade in the Specific Factors ModelFigure 3-12: The Budget Constraint for a Trading EconomyQ1M1Q1F38QJFQAFDAFDJFQAMDAMQJMDJMJapans food importsAmericas food exportsJapans manufactures exportsAmerica

38、s manufactures importsQuantity of manufacturesQuantity of manufacturesQuantity of foodQuantity of foodJapanese budget constraintAmerican budget constraintInternational Trade in the Specific Factors ModelFigure 3-13: Trading Equilibrium39Income Distribution and the Gains from TradeTo assess the effec

39、ts of trade on particular groups, the key point is that international trade shifts the relative price of manufactures and food. Trade benefits the factor that is specific to the export sector of each country, but hurts the factor that is specific to the import-competing sectors.Trade has ambiguous e

40、ffects on mobile factors.40Could those who gain from trade compensate those who lose, and still be better off themselves?If so, then trade is potentially a source of gain to everyone.The fundamental reason why trade potentially benefits a country is that it expands the economys choices.This expansio

41、n of choice means that it is always possible to redistribute income in such a way that everyone gains from trade.Income Distribution and the Gains from Trade41Budget constraint(slope = - PM/PF)PPConsumption of manufactures, DMOutput of manufactures, QM Consumption of food, DFOutput of food, QFQ1MQ1F

42、12Figure 3-14: Trade Expands the Economys Consumption PossibilitiesIncome Distribution and the Gains from Trade42Trade often produces losers as well as winners.Optimal Trade PolicyThe government must somehow weigh one persons gain against another persons loss.Some groups need special treatment becau

43、se they are already relatively poor (e.g., shoe and garment workers in the United States).Most economists remain strongly in favor of more or less free trade.Any realistic understanding of how trade policy is determined must look at the actual motivations of policy.The Political Economy of Trade: A

44、Preliminary View43Income Distribution and Trade PoliticsThose who gain from trade are a much less concentrated, informed, and organized group than those who lose（貿易受益者的集中程度，對情況的掌握程度，以及組織程度都不如那些貿易受損者）.Example: Consumers and producers in the U.S. sugar industry The Political Economy of Trade: A Preliminary View44S