| 4. |
Consider two countries: (1) a capital-abundant developed country
(DC) and (2) a
labor-abundant lesser developed country (LDC). |
|
a. |
Draw initial autarky unskilled labor market diagrams for
the two countries. |
|
b. |
Illustrate the combined impact in each of the
labor markets of the following developments between the two countries: (1)
trade liberalization (which means moving toward free trade), (2) labor
migration. and (3) foreign investment. |
|
c. |
Overall, what is the impact of increased globalization
between DCs and LDCs on the price of unskilled labor (PL) in (1) the DC? (2) The LDC? That is, does PL
rise, fall, remain the same, or move in an uncertain direction? Explain briefly. |
| |
|
|
| 5. |
Use the Stolper-Samuelson theorem
to help answer the following questions. |
|
a. |
Suppose that as a country's average
income level rises, tastes shift in favor of high-tech advanced goods and
away from labor-intensive basic goods. How will that shift in tastes affect
the country's distribution of income? |
|
b. |
Suppose that a lesser developed,
labor-abundant country decides to pursue import-substitution
industrialization. How will the resulting shift in production affect the
country's distribution of income? |
|
c. |
Consider economies whose most
significant factors of production are unskilled labor (L) and land (T =
terra firm). The region of Latin America is relatively land-abundant, while
Southeast Asia is relatively labor-abundant. Incomes go to land-owners and
labor-owners. |
| |
|
(1) |
Predict who will gain and who will lose within each
region as they open up to international trade, and explain your reasoning. |
| |
|
(2) |
Evidence suggests that the distribution of
income is typically more equal in Southeast Asia than it is in Latin
America. Based on your answer to part (1), are you surprised? Why or why
not? |
| |
|
|
| 6. |
Decide whether each of the
following quotes is consistent or not consistent with economic analysis of
markets and globalization, and briefly explain your decision. |
| |
a. |
"There is a unanimity among the developing
countries that protectionism [against trade] is the common enemy."
Sergio Amaral, Brazil's chief trade
negotiator,
The Poor Speak Up (2002) |
| |
b. |
"As skill levels improve in cheap-labor
countries -- for example, the new engineering class in India -- competition
is coming on in the very products for which the U.S. has had a global
advantage, such as software. If the new competition drives down prices too
much, U.S. export earnings will suffer, and the entire U.S. economy could
end up worse off."
Aaron Bernstein,
Shaking Up Trade Theory (2004) |
| |
c. |
"At the [Leimert Park] forum, many blacks said
they bore no ill will toward immigrants in general but were alarmed by their
seeming impact on their lives."
Teresa Watanabe,
Immigration Forum Gets Intense (2006) |
| |
|
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