Chapter 7 International Factor Movements
Chapter 7 ▪ International Factor Movements
Chapter Organization Introduction International Labor mobility a International Borrowing and Lending Direct Foreign Investment and Multinational Firms Summary Appendix: More on Intertemporal Trade Copyright C 2003 Pearson Education, Inc Slide 7-2
Copyright © 2003 Pearson Education, Inc. Slide 7-2 ▪ Introduction ▪ International Labor Mobility ▪ International Borrowing and Lending ▪ Direct Foreign Investment and Multinational Firms ▪ Summary ▪ Appendix: More on Intertemporal Trade Chapter Organization
Introduction Movement of goods and services is one form of international integration a Another form of integration is international movements of factors of production(factor movements) Factor movements include ° Labor migration Transfer of capital via international borrowing and lending International linkages involved in the formation of multinational corporations Copyright C 2003 Pearson Education, Inc Slide 7-3
Copyright © 2003 Pearson Education, Inc. Slide 7-3 Introduction ▪ Movement of goods and services is one form of international integration. ▪ Another form of integration is international movements of factors of production (factor movements). ▪ Factor movements include: • Labor migration • Transfer of capital via international borrowing and lending • International linkages involved in the formation of multinational corporations
International Labor Mobility A One-Good Model Without Factor Mobility Assumptions of the model There are two countries(Home and Foreign) There are two factors of production: Land(T)and Labor (L). Both countries produce only one good (refer to it as output”) Both countries have the same technology but different overall land-labor ratios Home is the labor-abundant country and Foreign is the land-abundant country. Perfect competition prevails in all markets Copyright C 2003 Pearson Education, Inc Slide 7-4
Copyright © 2003 Pearson Education, Inc. Slide 7-4 ▪ A One-Good Model Without Factor Mobility • Assumptions of the model: – There are two countries (Home and Foreign). – There are two factors of production: Land (T) and Labor (L). – Both countries produce only one good (refer to it as “output”). – Both countries have the same technology but different overall land-labor ratios. – Home is the labor-abundant country and Foreign is the land-abundant country. – Perfect competition prevails in all markets. International Labor Mobility
International Labor Mobility Figure 7-1: An Economy's Production Function Output, Q Q(T, L Labor, L Copyright C 2003 Pearson Education, Inc Slide 7-5
Copyright © 2003 Pearson Education, Inc. Slide 7-5 International Labor Mobility Labor, L Output, Q Q (T, L) Figure 7-1: An Economy’s Production Function