What does the Stolper-Samuelson theorem?
The simple Stolper-Samuelson theorem in the 2 x 2 model concludes that the relative wages and also the real wages of skilled workers throughout the economy should rise when the prices of skilled worker-intensive industries increase, and the real wages of the opposite factor, unskilled workers, should drop.
What is the Stolper-Samuelson Factor price Equalization Theorem?
This gives us the Stolper-Samuelson theorem: an increase in the price of a good will cause an increase in the price of the factor used intensively in that industry and a decrease in the price of the other factor.
Who gave Stolper-Samuelson theorem?
As first presented by Wolfgang Stolper and Paul A. Samuelson (1941), it dealt with a very special framework with many restrictive assumptions, most notably that the economy consists of only two broad sectors, and that production uses only two factors (often labeled capital and labor).
What does the Stolper-Samuelson theorem predict about the distribution implications of free trade?
The Stolper-Samuelson theorem predict trade liberalization will shift income toward a country’s abundant factor. It shows that countries which are labor abundant in a global sense may see wages decline with liberalization if they are capital abundant in a local sense.
What is the Stolper-Samuelson theorem quizlet?
Stolper-Samuelson theorem. The theorem states that — under some economic assumptions — a rise in the relative price of a good will lead to a rise in the return to that factor which is used most intensively in the production of the good, and conversely, to a fall in the return to the other factor.
What makes the Stolper-Samuelson theorem different than the Ricardo Viner model?
The Stolper-Samuelson Theorem holds that an industry with relative factor abundance will advocate for free trade, while one with relative scarcity will advocate for managed trade. The Ricardo-Viner theorem, however, assumes that factors are specific to their industries, and that capital might not be mobile.
Which of the following is explained well by the Stolper-Samuelson theorem?
Which of the following is explained well by the Stolper-Samuelson theorem? Farmers in land-rich Argentina tend to favor liberal trade policies. Domestic producers of goods that are also imported from foreign countries.
What is Factor Price Equalization theorem?
Simply stated the theorem says that when the prices of the output goods are equalized between countries as they move to free trade, then the prices of the input factors (capital and labor) will also be equalized between countries.
What is Ricardian model of international trade?
The Ricardian Model of Trade is developed by English political economist David Ricardo in his magnum opus On the Principles of Political Economy and Taxation(1817). Ricardo strengthens the case for free trade by giving it a theoretical framework based on the logic of comparative advantage.
What is protectionism in international political economy?
Protectionism is the economic policy of restricting imports from other countries through methods such as tariffs on imported goods, import quotas, and a variety of other government regulations.
What is meant by reciprocity in international trade relations?
reciprocity, in international trade, the granting of mutual concessions in tariff rates, quotas, or other commercial restrictions. Reciprocity agreements may be made between individual countries or groups of countries.
What is the Stolper Samuelson theorem quizlet?