Distributional Effects of International Trade

This set of flashcards covers the key concepts and theories related to the distributional effects of international trade, including winners and losers, effects on workers, and policy responses.

What do the distributional effects of international trade refer to?

They refer to how the benefits and costs of trade are shared among different groups in an economy.

What is the main prediction of the Heckscher-Ohlin theory?

A country will export goods using its abundant factors intensively and import goods using its scarce factors intensively.

What does the Stolper-Samuelson theorem link to changes in income distribution?

It links trade liberalization to changes in income distribution within an economy.

Who are the winners from international trade?

Winners often include export-oriented industries, workers in competitive sectors, consumers, owners of abundant factors, and firms receiving foreign investments.

What are some negative effects of trade on local industries?

Job loss in import-competing industries and reduced income for workers in declining sectors.

What impacts does international trade have on wages?

It can lead to increased wages in export industries and decreased wages in declining industries.

How can international trade affect consumers positively?

It can lower prices, provide better quality products, and increase variety.

What do regional effects of international trade indicate?

The impacts of international trade are unevenly distributed across different regions within the same country.

What is the Ricardo-Viner model?

It explains that when a country trades, some industries gain while others lose, as capital cannot move as easily as labor.

What are the characteristics of developed countries in international trade?

They export high-value goods, use advanced technology and skilled labor, control global supply chains, and gain higher income and influence.

How do developing countries benefit from international trade?

They gain jobs, foreign investment, and access to global markets but often rely on low-value exports.

What is one discussed policy response to job loss due to trade?

Trade Adjustment Assistance (TAA), which provides help for workers who lose jobs due to trade.

Name two development strategies to support domestic industries.

Supporting local industries and promoting value-added production.