Book contents
- Frontmatter
- Contents
- Preface
- PART ONE INTRODUCTION
- PART TWO INTERNATIONAL TRADE THEORY AND POLICY
- 2 Comparative Advantage and the Gains from Trade
- 3 Economic Efficiency and Comparative Advantage
- 4 Factor Endowments and Comparative Advantage
- 5 Factor Substitutiton and a Modified Ricardian Model
- 6 Factor Substitution and the Heckscher–Ohlin Model
- 7 Imperfect Competition and International Trade
- 8 Trade and Factor Movements
- 9 Instruments and Uses of Trade Policy
- 10 The Evolution of Trade Policy
- 11 The Future of the Trading System
- PART THREE INTERNATIONAL MONETARY THEORY AND POLICY
- Appendix A Mathematical Notes on Trade Theory and Policy
- Appendix B Mathematical Notes on Monetary Theory and Policy
- Appendix C Outlines of Answers to Selected Problems
- List of Abbreviations
- Index
8 - Trade and Factor Movements
Published online by Cambridge University Press: 05 June 2012
- Frontmatter
- Contents
- Preface
- PART ONE INTRODUCTION
- PART TWO INTERNATIONAL TRADE THEORY AND POLICY
- 2 Comparative Advantage and the Gains from Trade
- 3 Economic Efficiency and Comparative Advantage
- 4 Factor Endowments and Comparative Advantage
- 5 Factor Substitutiton and a Modified Ricardian Model
- 6 Factor Substitution and the Heckscher–Ohlin Model
- 7 Imperfect Competition and International Trade
- 8 Trade and Factor Movements
- 9 Instruments and Uses of Trade Policy
- 10 The Evolution of Trade Policy
- 11 The Future of the Trading System
- PART THREE INTERNATIONAL MONETARY THEORY AND POLICY
- Appendix A Mathematical Notes on Trade Theory and Policy
- Appendix B Mathematical Notes on Monetary Theory and Policy
- Appendix C Outlines of Answers to Selected Problems
- List of Abbreviations
- Index
Summary
THE ISSUES
This chapter examines two groups of issues. The first part of the chapter uses trade theory to show what happens when factors of production can move freely from one country to another. It concentrates on three issues:
How factor movements affect the total outputs of the countries involved and the composition of each country's output.
How they affect the incomes of the factors of production.
How they affect trade flows, the terms of trade, and economic welfare.
The second part of the chapter deals with some major issues raised by the theory of factor movements but not treated fully by it:
Why firms engage in multinational production, putting plants in many countries rather than one country.
How multinational production affects the individual economies involved and trade flows between them.
The chapter ends with a brief excursion into the theory of taxation. When a firm or individual resides in one country but earns income in another, what principles should govern the taxation of that income?
PERSPECTIVES AND OBJECTIVES
Most of our work thus far has focused on the nation state as the basic unit of analysis and has measured the effects of trade on the welfare of the typical consumer. When examining capital formation, for example, we compared the sizes of two changes affecting the welfare of the typical consumer in the growing country—the change in real income measured at initial prices and the change in the terms of trade induced by the change in the output mix.
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- The International Economy , pp. 148 - 174Publisher: Cambridge University PressPrint publication year: 2000