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PAGE 14Krugman/Obstfeld?International Economics: Theory and Policy, Eighth Edition
Chapter 4Resources, Comparative Advantage, and Income Distribution PAGE 15
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Chapter 4Resources, Comparative Advantage,and Income Distribution
?Chapter Organization
A Model of a Two-Factor Economy
Prices and Production
Choosing the Mix of Inputs
Factor Prices and Goods Prices
Resources and Output
Effects of International Trade Between Two-Factor Economies
Relative Prices and the Pattern of Trade
Trade and the Distribution of Income
Factor Price Equalization
Trade and Income Distribution in the Short Run
Case Study: North-South Trade and Income Inequality
The Political Economy of Trade: A Preliminary View
The Gains from Trade, Revisited
Optimal Trade Policy
Income Distribution and Trade Politics
Box: Income Distribution and the Beginnings of Trade Theory
Empirical Evidence on the Heckscher-Ohlin Model
Testing the Heckscher-Ohlin Model
Implications of the Tests
Summary
Appendix: Factor Prices, Goods Prices, and Input Choices
Choice of Technique
Goods Prices and Factor Prices
nChapter Overview
In Chapter 3, trade between nations was motivated by differences internationally in the relative productivity of workers when producing a range of products. In Chapter 4, this analysis goes a step further by introducing the Heckscher-Ohlin theory.
The Heckscher-Ohlin theory considers the pattern of production and trade which will arise when countries have different endowments of factors of production, such as labor, capital, and land. The basic point is that countries tend to export goods that are intensive in the factors with which they are abundantly supplied. Trade has strong effects on the relative earnings of resources, and tends to lead to equalization across countries of prices of the factors of production. These theoretical results and related empirical findings are presented in
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