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An introduction to the Specific-Factor Model, a trade theory that relaxes the assumptions of the Ricardian model. The model explores the implications of having more than one factor of production and immobile factors across sectors. It discusses the potential winners and losers in international trade and the impact on labor wages and returns to capital and land.
Typology: Lecture notes
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Production function with Constant Returns to Scale:
F ( K , L ) F ( K , L )
Production function with Constant Returns to Scale:
F ( K , L ) F ( K , L ) F ( K , L ) F ( K , L ) F ( K , L ) F ( K , L )
Example of production function:
1 / 3 2 /^3 M M M
Example of production function:
1 / 3 3 2 M M M MPL a K L 1 / 3 2 /^3 M M M
Example of production function:
1 / 3 2 /^3 M M M
Example of production function:
1 / 3 2 /^3 M M M
M K L T LA
How does it look like in this case? Production Possibility Frontier:
If one worker moves from A to B (i.e. from Ag to Manufacturing): Change in Q A
A Change in Q M
M PPF Slope of PPF reflects the opportunity cost of manuf. output:
Slope of PPF reflects the opportunity cost of manuf. output: If one worker moves from A to B: Why does the slope increase? MPL A increases and MPL M decreases PPF
Slope of PPF Why does the slope increase from point A to B?
M